Australian FinTech is Accelerating and Open in 2020

The Intersekt FinTech Festival took place in Melbourne two weeks ago and, as always, the conference team did a stellar job. They sourced some of the best speakers internationally and from interstate to push the collective understanding and ideation of where the industry is now and where it’s going. We left excited and energized for the future!

The Frollo team (Myself, Gareth, and Lilla) wanted to pen this recap of some insights and themes with a bit of a crowdsourced help from some of our old and new FinTech Friends. These are woven into our recap.

Additionally, we’re saw several other post-Intersekt blogs and news stories online so included links at the end to provide a hub of resources for those of you who couldn’t make it or who wanted to archive them. 

Our Thoughts aka “A CEO, CMO, and a Sale Guy walk into a bar…”

Gareth Gumbley (CEO), Lilla Kelemen (CMO), and I (Mark), have all been in the financial services industry for quite a bit and across several continents. I share that to let you know that we’re not easy to impress when it comes to content and while there were some sessions that missed their mark, the FinTech Australia group do a great job of pulling in thought-provoking speakers that are on theme and timely. Our biggest themes from the event are:

ACCELERATION

It’s been said that people constantly overestimate changes in the short term while underestimating the long-term impact of innovation and that’s been the case for FinTech here and abroad. 

We’ve been talking whole industry disruption for 10 years and it hasn’t taken place…yet. We overshot on expecting industry-wide disruption of incumbents so quickly but a clear theme from the conference was that FinTech innovation is scaling now and will be accelerating quickly across Australia in the coming years. 

“Australia has moved on from single product innovation to platform. Will this allow smaller bespoke offerings to niche areas? We’re still in platform stage but will be interesting to see what is later built on the platforms.” - Fiona of Sargon. #intersekt

Platforms that leverage open banking or “banking as a platform” as discussed by Andrew Clouey of Volt Bank are emerging as the key factors to pour gasoline on the FinTech fires. Platform and AIP interconnectedness allows for larger scale change for the consumer and will be interesting to watch in the next ten years.

In talking about platforms during the conference, I had an interesting conversation about the acceleration of innovation when asking an attendee, “is your organisation ready for that move to platform and pace of change from a culture perspective?” 

I asked because innovation is accelerated – or hindered – not just by technology but by the people and culture as well. We didn’t get too far into the conversation before the next session but don’t under estimate culture’s part within innovation. One of our FinTech friends, Melissa Mack, highlights the theme of culture at event and how it changes as an organization accelerates into a scale up. 

“Two of the most interesting sessions at Intersekt were not about finance, or tech, or even money, but about the culture that is behind all of that. 

‘There’s always a culture, whether it’s intentional or not,’ said Michelle Duval, who is the force behind Fingerprints for Success, and spoke at Intersekt on how to create a culture for success. 

Simplified, her research shows the most successful early startup (note: your needs change when you scale) teams are: Big picture thinkers, less detail and procedure focused, trust their gut feel, very low on external input, more initiative to start, less structured planning.” – Melissa Mack, Fintech PR and communications consultant (and MC at Intersekt)

The Acceleration theme was found throughout the event in talks by Tink, Klarna, Revolut, Athena, ANZ, and others. And what’s a key catalyst to the acceleration? Why it’s…

OPEN BANKING

We put this as theme two in the post but it’s easy to say that it was a dominant theme of the conference in large part because of the timing of the opening banking and CDR timetables.

“Open banking is the opportunity of the century to do banking better.” — Gwen Sandberg of Tink at #intersekt

We believe that in a true 100 percent open data world, digital financial tools can do the work for us to analyse the data around a current product, shop the market, and show the value of making a change. When we get to the point of automatic or even autonomous switching, then the full impact of open banking will be realised but a lot has to be done to get there. 

That’s open banking as applied to products and platform but our friend Christian Westerlind Wigstrom of Monoova highlights open banking as it applies to payments:

“I have been coming to Intersekt since 2017. Each year has had its own implicit theme: in 2017 it was crypto currency, in 2018 it was real-time payments and this year it was open banking. The rapid succession of hot topics is a reflection of the speed of change of not just technology but also expectations. Over the past few years, consumers have come to expect to be able to use (or even issue) any number of currencies of choice, make real-time transactions and control their data. Any one of these expectations would have seemed insanely futuristic just a few years ago. Technology is barely keeping pace with this escalation but consumer expectations are not going to get easier to accommodate. By 2030, I believe, the current everyday occurrence of paying will be dead. We will live through our days without ever having to interrupt what we are doing to fiddle with a wallet or even an eWallet. Payments systems will be advanced enough to deliver a constant, universal “Uber experience”. Insanely futuristic perhaps. But I wouldn’t be surprised if we can start lumping an ever growing number of Intersekt themes and fintech buzzwords into an overarching narrative: the story of invisible payments.”— Christian Westerlind Wigstrom – Head of Monoova

Christian’s insights are a great look at where we will get to on open banking/payments/finance once the value to the customer is grasped and that education step was a theme in the Open Banking panels during the conference. 

A fair bit of time was spent talking about the “education” around CDR for the customer but ultimately, when it’s palpable and part of their real-life experience in finance, we won’t need to educate them what it is because they will be seeing the value daily. Summed up by Scott Farrell here:

“Australians don’t care what open banking is, they just want their data to work as hard for them as they do.” — Scott Farrell#intersekt

FinTech Friend Kate Wilson expands on the move from education to seeing the value with some data around neobanks adoption: 

“According to RFi Group research, awareness of neo-banks is growing, albeit off a low base, with around 1 in 10 consumers indicating that they recognise one of the Xinja, Up, Volt or 86400 brands, up from 7% 6 months ago. However, there remains work to do around demonstrating the value proposition of neo-banks, with just 12% of consumers highly interested (8+/10) in trialling a new digital-only bank. Looking to the UK, uptake of neo-banks Monzo, Revolut and Starling Bank has been driven by a few key factors: the perception that these providers save their customers money, are easier to apply with and are easier to use. As such, the focus of the Australian neo-banks on simple products, great digital and PFM/ financial health will help to drive acquisition.” – Kate Wilson, Deputy GM ANZ, RFi Group.

The customer will have to see the benefit of how the neobanks will differentiate with value prop – likely driven by open banking - versus just get educated on it. 

There’s plenty more about open banking in the links at the end of the article. 

INCUMBENTS

We can talk about acceleration and open banking all day, but incumbents still have the advantage when it comes to customer apathy or inertia that can prevent or delay innovation. People are busy, so any friction the banks have when it comes to shopping or changing accounts still provides a moat. That said, we at Frollo like to build bridges, as do so many of the FinTechs in the Intersket audience. 

But the theme of “incumbents” isn’t listed here because we believe they are standing in the way or insurmountable. We believe – as do others we’re quoting – that there’s a lot of power in analysing incumbents as opportunities for disruption or even partnership. Even Shayne Elliott, CEO of ANZ, shared an insight into the dual perspective of the incumbents:

"I hope we are disrupted by smaller players — if we’re not disrupted, we won’t change, and if we don’t change, we’ll die. We welcome that disruption, if you will.” -- Shayne Elliott, CEO of ANZ.  Full Article Here. 

So it’s not “an either-or situation” as disruption doesn’t mean FinTechs will put the traditional banks out of business so much as FinTechs can force an evolution on the business model or position or even thinking of the incumbent industry. This was something Nick Malhalm pointed out on LinkedIn:

A key takeaway was to hear challenger banks talk about the need to find alternative business models and paths to profitability. “With no fees and NIM being halved over the past 15 years traditional revenues models are and have shifted, whilst the new models are yet to be established.” – Nick Malhalm, Head of Innovation and Partnerships at BOQ, 

And can we as FinTechs successfully partner with banks to work through these new models? Can they adapt their processes to work with smaller organisations? Tung Nguyen of Link Group believes the key is in the scaling up maturation process:

“My key takeaway was in the EY Fintech Censusdiscussion when the discussion turned to what it takes for startups to effectively partner with corporates.

Gareth Gumbley said, “It’s all about managing the perception of risk. The more mature we become, the easier it is for corporates to work with us. The more stable we become, the less risky we appear. Companies like to do business with other organisations not too unlike themselves” 

Link Group, as a corporate partner that works with startups to pilot new capabilities and provide access to capital and distribution, sees that insight as a very valuable one and demonstrates that the startup has transitioned to a scale up maturity.In the mind of a corporate, this phase shift significantly reduces the risk of engagement and increases the probability of successful pilots and deals for all parties.”– Tung Nguyen, Director, Digital & Innovation at Link Group

TAKING ON 2020

So besides accelerating into open banking and taking on – or working with – the incumbents, where do we go from here? Great question! Please let us know when you have the answer. Just kidding! 

But seriously, please let us know. 

And, again, I’m kidding…unless you do know? 

In all seriousness what we do know is that these trends will propel us into 2020 and beyond (hence the title of this piece) and will take a village mentality to change the industry. We collaborate or partner with no less than 15 organizations right now on data and APIs to do what we do and are in conversations with at least another 20 right now. These don’t even include client numbers. We do this because a healthy ecosystem needs a large flow of data and connections. And not just technically but people and organziaotns as well. 

I (Mark) just finished an amazing book called Rebel Ideasand one of the points it makes is that the collective intelligence of the human race was pushed forward not by smart individuals who innovated but because of our systems of communication and information exchange. Networked societies that shared ideas and information within their group and with neighbouring groups as they travelled, innovated much faster and that made their brains and heads grow to adapt to the collective intelligence expansion. These trends continue today when the book looked at prospective doctors going through medical school and smartest ones who often kept to themselves had an advantage in year one but were quickly surpassed by other students who may not have had the highest IQs but who banded to learn and study together. They could share more learnings, ideas, different perspectives, etc. because they were an open group for the benefit of the collective. 

Accelerating and openness aren’t just technological themes. They are the things that help us grow as individuals, as a FinTech ecosystem, and as an industry. This is why sharing these ideas post conference are so important and why we reached out to many to gain their insights and pool them here. 

Speaking of accelerating…cheers to the last 10 weeks of 2019. They will go fast. 

2020 is going to be an absolute legend for those working together!

Main Author: Mark Zmarzly came to Australia in 2017 from the U.S. thanks to an Advance Queensland grant to mentor the next generation of Australian founders. His FinTech innovations have been recognised as a top 5 global FinTech by SXSW, a best practice in mortgage innovation by Forrester Research, Finovate, and as a top 10 FinTech at Money 20/20. He now works as the Sales Director for Frollo after their acquisition of Hip Money. 

Frollo’s API-driven software powers neobanks, traditional banks, other FinTechs, and lenders to improve the overall financial health of everyday Australians. Frollo has been recognised by the Metlife Foundation, Finder, EY, and as a global top Inclusive FinTech 50 award winner. 

WHAT OTHERS HAVE SHARED ABOUT INTERSEKT:

Banks no longer 'like god': Are we ready for fintech 2.0?

https://www.smh.com.au/business/small-business/banks-no-longer-like-god-are-we-ready-for-fintech-2-0-20191015-p530xe.html

EY Census Report: https://fintechauscensus.ey.com/2019/

Tier One People Reflects on Intersekt: https://tieronepeople.com/2019/10/23/intersekt-2019-fintech-australia/

Are we on track for open banking? 6 takeaways from Intersekt: https://www.finder.com.au/open-banking-intersekt-2018

CommBank on open banking: “We do want to participate”: https://www.finder.com.au/commbank-on-open-banking-we-do-want-to-participate

'I hope we're disrupted': ANZ boss welcomes fintech fight:https://www.smh.com.au/business/small-business/i-hope-we-re-disrupted-anz-boss-welcomes-fintech-fight-20191016-p5318s.html

Please add any others we missed via the comments. Thanks!