Unlocking the potential:
The Fintech opportunity for Sydney
October 2014
Unlocking the potential: the Fintech opportunity for Sydney
Foreword from the Deputy Premier
Sydney’s position as Australia’s financial services powerhouse is set to move up a
gear. The convergence of digital and financial sector strengths and growing global
recognition of the city’s role as a key financial hub for the Asia Pacific are fuelling
Sydney’s fast emergence as one of the world’s most exciting new financial
centres.
The NSW Government has recognised this opportunity and is working with
businesses and researchers to improve collaboration and knowledge sharing
across the NSW financial services industry. We are supporting the establishment
of an industry-led Knowledge Hub for financial services to create a new platform
for collaboration, to enhance productivity and innovation, build capabilities, and
identify market opportunities.
With an improved culture of innovation and collaboration between government,
industry and research, we have the potential to provide fresh insights for NSW
businesses to help them build sustainable long term competitive advantages.
The Financial Services Knowledge Hub, coordinated by the Committee for
Sydney, aims to capitalise on this by positioning the NSW financial services
industry for new markets, new opportunities, new capabilities and global growth.
This report provides some specific insights into the rapidly developing market for
financial services technology or Fintech, and it will help to inform the activities of
the Financial Services Knowledge Hub. Fintech presents a fantastic opportunity
for Sydney as a leading financial services and technology hub for Australia and
the Asia Pacific.
I commend the Committee for Sydney for commissioning this highly relevant
research, and for its important ongoing role in driving growth and innovation with
the Financial Services Knowledge Hub. This initiative will further enhance
Sydney’s emerging position as a leading global financial services centre.
Andrew Stoner
Deputy Premier
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
Contents
Page
Scope
4
Executive summary
5
Fintech in Sydney: Building on success
8
Importance of financial services to Sydney
11
§
Importance of the financial services industry
12
§
The changing industry landscape
14
§
The development of Fintech
19
The contacts at KPMG
in connection with this
report are:
What is happening globally
23
§
Global perspective
24
Ian Pollari
Head of Banking Sector
Partner, Sydney, KPMG
Australia
§
What can we learn from global leaders
32
Tel: + 61 2 9335 8408
[email protected]
Sydney Fintech today
33
§
34
Sydney’s Fintech sector
Key implications and recommendations
40
§
The key implications for Sydney
41
§
Building on our foundations
42
§
Recommendations
43
Appendix
James Mabbott
Financial Services
Director, Sydney, KPMG
Australia
Tel: + 61 2 9335 8527
[email protected]
46
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
Scope of the research project
Supported by
Unlocking the potential: the Fintech opportunity for Sydney is the result of a KPMG research project for the
Committee of Sydney, aimed at understanding the emerging Fintech sector and what conditions, if any, are
necessary and sufficient to enable Sydney to compete with other global cities
Background and purpose of the research
The Fintech eco-system in Australia
Approach undertaken
■
■
■
■
■
This research has been commissioned by
the Committee for Sydney in its role as a
key member of the Financial Services
Knowledge Hub. The Knowledge Hub
aims to establish Sydney as a key global
financial services hub through encouraging
cross industry collaboration to identify the
key projects and initiatives required to meet
this goal.
Fintech (Financial Services Technology)
has been chosen as one of five key areas
to focus on initially (other areas of focus
include Index Based Products, Asia Pacific
Equities for Australian Super, Australian
Bond Markets and Infrastructure & Real
Estate Funds) with the first phase being
research into global leaders for Fintech.
KPMG’s report, Unlocking the potential: the
opportunity for Sydney, seeks to explore
five key questions:
1.
What is Fintech?
2.
Where are the major global
ecosystems for Fintech?
3.
What are the necessary conditions to
establish a successful Fintech
ecosystem?
4.
What are the key implications for
Sydney as a financial services hub?
5.
What recommendations would we
make for private and public sector
companies to establish a successful
Fintech ecosystem in Sydney?
■
■
■
KPMG Global Services desktop research of
current publications and reports into Fintech
in Australia and globally, as well as a review
across eight leading and emerging global
centres for Fintech.
A series of interviews with Australian Fintech
start-ups (emerging and successful), Venture
Capital funds, financial institutions and
Government and other stakeholders.
Internal KPMG workshop with key local and
global partners from the technology and
financial services industries to test research
findings and assumptions
Meetings with key local and global
stakeholders to verify and refine research
outcomes
The purpose of this research is to identify
what conditions, if any, are necessary and
sufficient to enable Sydney to compete and
thrive on Fintech at a local, regional and
global level.
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Executive Summary
Unlocking the potential: the Fintech opportunity for Sydney
Executive Summary
Financial services is a substantial driver of the Australian and NSW economy,
with Sydney widely regarded as a leading international financial services centre
The emergence of Fintech represents an opportunity and a threat to Sydney’s
position as a leading international financial services centre
■ The Australian financial services industry contributes the highest share of
■
■ Financial services is a significant employer in NSW, representing 42% of total
■
■ Sydney is the dominant city for finance and insurance, with the most
■
sector value to the national economy (9%), employing 420,000 people and
paying A$11.5 billion in tax in 2013, 18% of total corporate tax receipts.
industry employment nationally.
significant cluster of industries, as well as critically linked industries that
support financial services, such as ICT/digital, tertiary education, creative and
professional services.
■ Sydney boasts a strong and sophisticated financial services industry, ideally
located within the rapidly growing Asia-Pacific region. The city of Sydney is
the location of employment for 77,946 workers in the finance and insurance
industry, or around 21% of the total Australian employment in this sector.
■ Sydney is home to many Australian and foreign-owned financial institutions,
the financial regulators, central bank and stock exchange (e.g. ASX).
■
■
■
There is a paradigm shift in financial services occurring driven by technology, with
new business models emerging
■
■
■
Post GFC, strategic imperatives for financial institutions and evolving
consumer behaviours, in part driven by new technology, has been a catalyst for
innovation in the global financial services industry.
The traditional financial services landscape is being disrupted by new entrants
leveraging technology to deliver new and existing services in more relevant
and convenient ways to consumers and businesses.
■
Financial institutions globally are taking a wide range of approaches in trying
to keep up with the wave of technology innovation, with Fintech emerging as
a key enabler.
The Fintech sector is experiencing rapid growth globally, with financing
activity predicted to rise from US$3bn to US$6-8bn by 2018.
As a leading global centre for financial services, coupled with a deep cluster
of ICT/digital, creative and professional service industries, Sydney is ideally
positioned to capitalise on this growing trend.
Fintech provides a pathway to position Sydney for the ‘digital economy’,
fostering new business ventures, both in the financial services and
technology industries, creating benefits from a multiplier effect across NSW
and nationally.
Fintech also represents an opportunity for Sydney to export our financial
services and ICT/digital capabilities globally.
Other leading international financial centres are also pursuing the Fintech
opportunity and are supporting this through a strong alignment of activity
and investment at all levels of government, regulators and industry to
accelerate their success.
Based on our discussions with local Fintech start-ups, other countries, such
as the UK, are actively targeting Australian Fintech start-ups to relocate to
London.
The agglomeration of technology and financial services (“Fintech”) is creating
new business models, e.g. peer to peer lending.
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
We need to proactively respond to maintain our leadership position
■ To capitalise on the opportunity and defend our current strong position in the
financial services industry (i.e. protect tax revenue and employment), Sydney
must proactively respond in a coordinated and committed manner.
There are a series of recommendations, including both the public and private
sector, that are proposed
■
Recommendations proposed to build momentum for Sydney as a Fintech
sector are as follows:
■ No-one can predict which specific technologies or business models will be
-
State Government to continue working with partners in the private sector and
the Committee for Sydney on the development of a comprehensive Fintech
vision and strategy for Sydney.
■ Therefore, the focus should be on fostering a collaborative environment for
-
Explore the establishment of a not-for-profit Fintech hub in the heart of the city
■ Creating the enabling conditions to support as many options as possible
-
Establish a series of events in the city, regionally and globally to promote
Sydney as a leading Fintech hub in the ASPAC region, in line with our
leading financial services position.
-
Form an independent Fintech focussed industry association, based in
Sydney, to give the sector a public voice and champion.
-
Review current regulatory, tax and business incentives available to the startup community and target foreign repeat entrepreneurs and attract them to
Sydney.
-
Engage the university sector to research key Fintech themes.
winners (or losers) from the emergence of new technologies and the
implications for financial services.
that co-locates venture capital, technology start-ups and established
financial services firms.
entrepreneurial activity and innovation from new Fintech start-ups and
established financial institutions to flourish.
should be prioritised by government and industry.
There are a set of enabling conditions that can be drawn from other developed and
emerging Fintech hubs
■
Analysing the emergence of Fintech in other international jurisdictions, the
following factors were observed as important enablers:
-
available and accessible early stage funding for Fintech start-ups and a strong
pipeline of opportunities for investors/VC funds;
-
depth of financial services and technology talent, with close proximity of these
talent pools to each other (in city locations);
-
a robust financial services industry, with a vibrant technology start-up community
with mentoring, networking and high visibility;
-
Government and regulatory support for the Fintech sector specifically, and
technology start-ups generally; and,
-
business backing for a Fintech hub, with high levels of collaboration and a strong
culture of knowledge-sharing and entrepreneurship.
■
The UK in particular have accelerated the development of London as a Fintech
hub over the past 18 months through a concerted effort by the government,
regulators, the City of London, technology start-ups and industry.
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Fintech in Sydney:
Building on success
Lucy Turnbull, AO, Chair Committee for Sydney
Fintech in Sydney: building on success
Unlocking the potential: the Fintech opportunity for Sydney
Fintech in Sydney: building on success
Sydney’s financial services industry is a key driver of national productivity. In itself it
produces 5 percent of Australia’s GDP with a significant extra multiplier effect in
innovation and job creation - for the rest of the economy. Overall, Sydney’s finance and
professional services driven CBD produces more wealth for Australia than the mining
sector as a whole.
At the same time, Sydney is also the centre of Australia’s ICT industry and leads the
nation in technology start-ups. It is because of the agglomeration and combination of
high labour productivity sectors here that the Committee for Sydney has talked of
Sydney’s increasingly important ‘dividend’ for Australia as the mining boom moderates
and the need for public policy and investment to support its continued growth - in the
national interest.
However, despite the importance of ‘Fintech’ both on the global stage and nationally
and the fact that many financial services companies are clearly redesigning their
business models because of the new digital and mobile platforms, there has been little
research on it in Australia. The conditions for the emergence and success of Fintech
here have not previously been identified to inform a strategy aimed at actively
promoting the growth of the Fintech sector. As Fintech will actually shape the future of
Sydney’s key financial services industry and produce beneficial spill-over effects in
other productive, tech-based sectors of our urban economy, this gap needs to be filled.
This report goes some way towards doing that. It is the first study produced under the
aegis of the new Financial Services Knowledge Hub initiated by the Committee for
Sydney, its many members in finance, ICT and the NSW Government Department of
Trade and Investment. Recognising that digital, mobile and cloud computing
technologies are revolutionising how customers bank and businesses raise finance,
the Knowledge Hub will seek to help accelerate Sydney’s growing position in the
region’s financial services industry by supporting its burgeoning Fintech scene and the
eco-system and environment required to sustain it.
Focusing on what will enable the sector to grow
Like all Committee for Sydney reports, this is not an academic
exercise. The report has a decidedly practical objective. It focuses
on what innovations, policies or tools are required across the public
and private sectors to help grow the capacity and economic impact
of Sydney’s Fintech sector. Sydney has great foundations for a
thriving Fintech cluster and a significant opportunity to benefit from a
technological revolution that plays directly to its strengths, both as a
financial and an ICT centre.
Of course while understanding our strengths we also need to
overcome our challenges.
While Sydney enjoys many natural advantages and its lifestyle is a
magnet for young talent, previous research finds that such mobile
talent is attracted for rational economic reasons to cities with the
right mix of assets. They want to be assured that the employment,
enterprise and investment opportunities and the face to face, digital
or transport networks they need from their city – and indeed the
required tax and visa regimes - are also available alongside the
lifestyle they seek.
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Fintech in Sydney: building on success
Providing a supportive eco-system for innovation and growing export potential
With tech entrepreneurs, this means that the eco-system and environment for
innovation need to be attractive and supportive and also that the skills and
finance they need are readily available. In this context this sector faces some
critical challenges and barriers to overcome. This report seeks to identify them
and suggest ways in which the ecosystem supporting Sydney’s Fintech cluster –
that combination of financiers, entrepreneurs, customers and civic support –
can be further enhanced.
And, by growing the Fintech sector in Sydney we will further cement Sydney’s
reputation as the national leader of innovation in the financial services industry,
as well as reinforce our reputation as a hub of technology development and
talent. With the right policy settings, talent attraction strategies, collaboration and
above all ambition, Sydney can become a key Fintech leader within the Asia
Pacific region and a key exporter of financial services and wealth management
expertise and products to the region. That must certainly be our objective.
Collaborating to compete – and to accelerate learning from competitors
Just as the most successful cities internationally are those who ‘collaborate to
compete’ so too will greater success for the Fintech sector require greater
collaboration. In principle the very essence of Fintech is the coming together of
financial services and ICT/digital economy enterprise. We must build on this.
Whereas some serendipity always helps in innovation, the report stresses that
little should be left to accident if we wish to succeed in Fintech in Sydney.
Structuring and enabling collaborations – between banks, alternative finance
providers, insurance providers, Fintech entrepreneurs, universities, venture
capitalists and indeed government – is vital to overall success and specifically to
sharply reduce the typically longer product development and sales cycles found
in the Fintech sector. Assertive collaboration, skills development and capacity
building are crucial to speeding up the maturing of Fintech firms and to realising
a flourishing Fintech sector in Sydney.
Experience from other global cities suggest the initiatives and institutional
innovation is required. Both New York and London are leveraging the benefits of
having the two interlinked sectors of financial services and ICT, close to one
Unlocking the potential: the Fintech opportunity for Sydney
another physically by actively promoting closer working of financial institutions
and tech entrepreneurs: this ensures innovation is tailored to the specific needs of
financial services and their customers. We must do the same.
Both are actively engaged in supporting training and workshop initiatives to arm
first time Fintech entrepreneurs with the skills that would otherwise take years of
experience to attain. We must do the same.
Both have created Fintech accelerators or innovation labs to reduce the time to
market and speed up deal-making between financial institutions and Fintech
enterprises from 18 months to 18 weeks. We must do the same.
Vital: effective partnership between the public and private sectors
At the heart of success are effective public-private cooperation. We know that the
NSW Government ‘gets’ financial services and understands Sydney’s dividend
from them for the state and the nation. We have also seen how creative a partner
they have been in working with the Committee and the private sector on
developing effective new industry policy and initiatives such as the Global Talent
and Knowledge Hub projects. We are confident that our State Government will
seek to reduce any unnecessary barriers to the success of Sydney’s financial
services industry and to the development of a successful Fintech sector.
Some further policy development and advocacy will be required at the
Commonwealth level to ensure that we have competitive tax and visa regimes in
place to enable Sydney to attract the global talent and investment required to
maintain its existing status as the nation’s centre for both finance and ICT and
indeed to enable it to increase its economic significance in the region. In making
the case for Sydney as Australia’s financial services export platform, the NSW
Government will, we believe, be able to point in the coming years to a flourishing
Fintech sector of regional significance. This report, and its key recommendations,
will help catalyse this result.
Thank you to Michael Rose for Chairing the Committee’s Financial and
Professional Services Taskforce, Andrew Low for Chairing the Financial
Services Knowledge Hub and KPMG for developing this report.
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
The importance of
financial services
to Sydney and the
case for change
The importance of the financial services industry
Unlocking the potential: the Fintech opportunity for Sydney
Financial services and ICT, are significant employers in NSW, representing 42% and 37% respectively, of
total industry employment nationally
Size of the finance and insurance services workforce
100% = 420,000
Other
WA
QLD
NSW
34,000
(9%)
32,000
(8%)
180,000
(42%)
54,000
(13%)
120,000
(28%)
VIC
■ The distribution of workforce in the financial and
insurance services industry corresponds to the
share of total population in Australia, and in
turn, the share of the country’s banking
businesses located in each states.
recorded the largest employment gains in the
industry, at 10% and 8% respectively.
■ The vast majority of NSW’s financial services
industry employees are located in the Sydney
CBD.
■ Within, financial services, the banking sector is
■
■
■
■
■
■ Whilst the industry employs an
180,000
almost equitable mix of
professional and more generic
skills across states, NSW and
VIC have a higher proportion
(54%) of professionals and
managers than more junior,
clerical and administrative staff
39%
120,000
■ Over the past five years, both NSW and VIC
the dominant employer in NSW, employing over
40% of the workforce.
■
Key employing occupations of finance and insurance services workforce
15%
38%
17%
55,000
39%
33%
4%
18%
NSW
VIC
7%
QLD
26%
16%
30%
45%
7%
38,000
33,000
15%
42%
52%
WA
50%
8%
Professionals
Managers
Clerical and admin.
Other (sales, technicians)
Other
Sydney’s highly educated and multilingual financial services workforce is growing. About 180,000 people were employed in NSW’s finance and insurance services industry,
representing 42% of the Australian industry.
Finance and insurance is the largest industry in NSW, contributing A$57 billion to the State’s economy. NSW makes up 46% of Australia’s finance and insurance industry. It
is also the second fastest growing industry in NSW, recording annual average growth of 3.6% between 1998-99 and 2008-09.
Furthermore, NSW has number of leading workforce education and training providers in financial services; anecdotal evidence suggests these providers have a positive
level of engagement and make significant investment in education and training activities.
NSW accounts for 43% of Australia's total ICT businesses and almost 40% of national industry value-added output.
Almost 160,000 people are employed in the ICT sector in NSW, representing 4.7% of total employment in NSW and 37% of Australian employment in the ICT industry.
NSW has over 13,000 students studying information technology courses at the 11 universities in NSW
Source: ABS Catalogue number 6291.0.55.003 - Labour Force, Australia, Detailed, Quarterly
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
The importance of the financial services industry
Unlocking the potential: the Fintech opportunity for Sydney
Sydney has the greatest concentration of overall finance and insurance industry employment, as well as ICT,
professional services and tertiary education
Sydney is the dominant City for finance and insurance, with the most significant cluster of industries, as well as critically linked industries, such
as ICT, digital, tertiary education and creative services
Finance and insurance industry
■ The City of Sydney is the location of employment for 77,946 workers in the finance
and insurance industry, or around 21% of the total Australian employment in the
industry in this sector.
■ Of the top 10 locations for finance and insurance employment, 3 are located in
Sydney. Therefore, Sydney has the greatest concentration of overall finance and
insurance industry employment.
■ The City of Sydney is the clear leading city for financial services in Australia,
ranked 1st in a number of ANZIC industries:
-
Depository financial institutions – 57.1%
-
Broking services – 43.6%
-
Life insurance – 20.8%
-
Banking services – 19%
-
General insurance – 18.5%
-
Professional services
Professional Services
■ The City of Sydney is also dominant in critically linked industries to the financial
services industry in terms of clusters of national employment in:
■ Digital industries – 14.7% (rank: 1st)
■ Tertiary education, Adult education and Support services – 5.8% (rank: 3rd)
■ Creative industries – 13.8% (rank: 1st)
■ The City of Sydney grew in employment terms at a rate greater than the national
average, as a result of the cluster/agglomeration economies and innovation.
■ This suggests that concentrated collaborative work between businesses in these
financial industries, education and research institutions and Commonwealth,
state and local government could provide the support to ensure that these
benefits continue or can be enhanced in the future.
■ Notably, financial centres are not country, rather cities described as ‘hubs’, e.g.
New York and London as ‘financial hubs’.
■
■ Sydney is home to the largest base of professional services (e.g. accounting,
■
Critically linked industries
■
taxation, legal, consulting) to the banking, finance and property industries
(estimated to be around 30-35%).
■ The City of Sydney is also the workplace for 15% of the total information, media and
Sydney boasts a strong and sophisticated financial services sector, ideally
located within the rapidly growing Asia-Pacific region. It has deep, liquid
financial markets and is recognised as a leader in investment management, as
well as areas such as infrastructure financing and structured products.
Sydney is an attractive city to relocate staff, ranking in the top 10 cities of the
World Liveability Index of 140 cities ranked on culture and environment,
healthcare, education and infrastructure.
Sydney ranked 8th in the Global City Index in 2014 and ranked 12th in the
Global Start-up Ecosystem Index 2012 (higher than any country in the AsiaPacific region).
technology industry and 11% of creative and performing arts activity across Australia.
Source: City of Sydney Council; Z/Yen 2014; Economist Intelligence Unit, Liveability Ranking, 2013; Singapore Civil Service College, 2014; IBIS World 2014
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
The changing industry landscape
Unlocking the potential: the Fintech opportunity for Sydney
Changing consumer behaviour and demands are putting greater pressure on traditional providers of
financial services
Tomorrow’s customer is likely to be even more demanding and less loyal to their financial institution, characterised by a desire for immediacy,
valuing simplicity and transparency and expecting a more personalised service.
Consideration of non-traditional alternatives
Reduced information asymmetry
■ Customers are likely to be more willing to consider
■ Technology is reducing information asymmetry in the
non-traditional alternatives to ‘traditional’ loans,
savings, investments and retirement products,
either as a result of increased availability,
customer awareness, social and peer pressure.
Growing advice from peers
■ Customers may increasingly trust and value
industry, giving customers greater transparency
when selecting a financial services provider, product
or service.
Personalised services
■ Multitasking and time scarcity is likely to continue to
advice from alternative sources. Decisions are
likely to be influenced not only by their peers,
friends and colleagues, but also the opinions of
online groups and social media communities,
which may span countries, cultures and which will
almost certainly be comprised of strangers.
Willingness to adopt new technology
■ As the pace of technological advancement
continues to increase, customer’s willingness to
adopt new products and technologies is also likely
to grow. Consumers are adopting innovations at
an increasingly rapid rate
escalate, prompting more customers to look for timesaving solutions, single point of access and
aggregation across a range of providers.
■ This is evidenced by the level with which customers
have embraced self-service. In return for sharing
more data about themselves, customers will demand
even greater levels of personalised service.
Less loyal
■ Customers are increasingly value-driven and less
loyal to financial institutions. This concern for value
has driven increased levels of switching, as well as
increased the likelihood of future switching.
Source: KPMG, Investing in the Future
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
The changing industry landscape
Unlocking the potential: the Fintech opportunity for Sydney
The rapid pace of technological advancement will continue with companies seeking to significantly alter the
financial services landscape
Examples of new entrants, both from established technology companies, as well as relatively new companies, are circling financial services and
payments
Google has already
launched a plastic debit
card to accompany its
Google Wallet, which is
used by millions of
consumers.
PayPal is rapidly shifting from being a
company that powers payments on the
Web to a company that provides
payments on mobile devices, at cash
registers, and soon, on the Internet of
Things.
Square, the mobile payments
company started by Twitter cofounder Jack Dorsey, has begun
preparations to launch in Australia,
according to sources with
knowledge of the plans.
San Francisco company Stripe has
launched its global payments
platform in Australia, marking a first
move into the Asia-Pacific region for
the three-year-old payments start-up
backed by a trio of PayPal cofounders.
SocietyOne is Australia's only active
peer-to-peer lender. They claim to be
able to offer borrowers cheaper loans
and investors access to a new asset
class with a lower cost business model
that is more efficient than that of
traditional banks.
Bitcoin uses peer-to-peer technology to
operate with no central authority or
banks; managing transactions and the
issuing of bitcoins is carried out
collectively by the network. Bitcoin is
open-source and its design is public.
Financial
Services
The social network is only weeks away from
obtaining regulatory approval in Ireland for a
service that would allow its users to store
money on Facebook and use it to pay and
exchange money with others.
Apple has incorporated an NFC chip in its
latest smartphone, the iPhone 6, and will
support it with a service called Apple Pay.
The iPhone 6 and iPhone 6 Plus have an
NFC antenna and a Secure Element chip
allowing users to be able to add their
debit and credit card details from their
iTunes store account. Payment will also
be possible via the Apple Watch.
Many technology players are focussed on disrupting financial services, with the substantial profits of banks attracting the attention of
many of the world’s most innovative companies.
Despite these threats, KPMG research reveals that “53 per cent of consumers trust their banks the most when it comes to making
financial transactions over a mobile device."
Source: KPMG Desktop Research
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
The changing industry landscape
Unlocking the potential: the Fintech opportunity for Sydney
Digital disruption is challenging existing business models, with estimates of around 25-30% of current
banking industry revenue at risk
Technological change is one of the biggest disruptions facing banking since the 1980’s
A$27bn of current banking industry revenue is at risk of digital disruption
30
10.3
“
26.8
25
20
Removes double
Counting for
credit cards
15
10
6.8
”
Brian Hartzer, Westpac (BRW 2014)
13.2
■
2.2
5
■
0
Payments
Merchant
Acquiring
Lending P2P
Banks should try to act like start-up
companies if they are to thrive in an era
of sweeping technological change…Westpac is trying to think and act like a
200-year-old start-up company.
Lending SME
Total
■ In the near term, it is expected that shorter-tenure, high turnover products like
credit cards, loans and payments will see the most digital transformation.
■ Looking further ahead, bank accounts and mortgages, which together typically
drive more than 50% of many banks’ revenues and usually provide “sticky”
annuity streams, will be brought into the fray
■
■
The technology is now in place to substantially transform financial services
(e.g. cheap IT, widespread mobile penetration, regulation, such as the
Financial Claims Scheme requiring Single Customer View, real time
payments, internal ratings based models)
According to Macquarie, there appears to be A$27 billion of current revenue
at risk. The areas of financial services most at risk of digital disruption are
lending, payments and merchant acquiring.
Regulation is also driving a level of innovation and competition, e.g. the
RBA and the development of real-time payments infrastructure.
The ATO recently highlighted in its Banking and Finance Industry Strategy
for 2014-15, that digitisation may present issues and risks for the traditional
retail banking model (e.g. peer to peer lending, trading platforms, electronic
payment and investment services).
Source: 2014 Macquarie Research: Australian Banks ‘Trust’ in the IT Arms Race; ATO; McKinsey; Business Review Weekly
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
The changing industry landscape
Unlocking the potential: the Fintech opportunity for Sydney
Institutions are taking a wide range of approaches in trying to keep up with the wave of technology
innovation that is threatening to disrupt their sector
■ Announced a venture capital fund
■
■
in July, 2014.
The fund will be based in London,
with a global remit.
Will provide Fintech companies
with finance; US$100m
committed.
■ BBVA announced the
formation of BBVA Ventures,
a strategic initiative that will
invest US$100m in start-ups
looking to transform the
financial services industry.
■ HSBC has allocated up to
US$200m for investment in
tech start-ups with the aim of
improving the bank’s financial
technology.
■ In June, 2014, Barclays
announced the Barclays
Accelerator, a 15-week
programme for Fintech startups.
■ The bank will invest globally,
■ 10 start-ups will receive up to
■ Citi Ventures is Citi's global
■ American Express,
both in firms that operate in
retail and capital markets
financial services technology.
■ Based in Silicon Valley, it is
establishing ties with start-up
firms, incubators and venture
capital funds.
Source: Company websites; Financial Times; Wall Street Journal
corporate venturing arm,
chartered to collaborate with
internal and external partners
to conceive, partner, launch,
and scale new ventures that
have the potential to disrupt
and transform the financial
services industry.
US$50k and be selected to go
to London to accelerate their
Fintech businesses.
established Amex Ventures
which is a US$100m fund.
■ Invests in innovative start-ups
in order to enhance Amex’s
company's core capabilities
and accelerate their efforts in
digital commerce and
financial inclusion.
■ UBS has created a system of
internal working groups to work
on specific technology projects.
■ So-called “innovation spaces”
have dedicated funds to
finance their operations and
will comprise individuals from
both the IT and the business
divisions of UBS.
■ Wells Fargo has launched a
financial technology accelerator
program that combines a cash
investment (ranging from US$50k
to US$500k) for a minority stake
with six months of coaching and
collaboration.
■ The bank has selected three
companies to pilot the accelerator
in areas such as artificial
intelligence and location and
mobile identity technologies.
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
The changing industry landscape
Unlocking the potential: the Fintech opportunity for Sydney
Leaders of the world’s largest, most successful financial institutions recognise the emerging threat…and
imperative for change
“
When people ask me: ‘Who do you look to for leadership
or who are you impressed with” . . . ”My comments quickly
are Amazon, Google, Apple,
”
John Stumpf, CEO, Wells Fargo (Financial Times 2014)
“
Tech companies all want to eat our lunch. Every single
one of them is going to try”…“We’re going to have
competition from Google and Facebook and somebody
else.
”
Jamie Dimon, CEO, J.P. Morgan (Financial Times 2014)
“
The Apples, the Googles, the Samsungs, the PayPals,
the credit card companies, who can pick particular
slivers as a result of the application of technology into
financial services and compete”…”We need to be
prepared for that.
”
Ian Narev, CEO, Commonwealth Bank (SMH 2014)
“
We are stepping up the pace of innovation at the bank
I run: generating more ideas, implementing them
more swiftly, being quicker to discard the ones that do
not work”…“The upsides are huge, and the downsides
are stark. That is why accelerating technology-driven
innovation is a top priority.
”
Peter Sands, CEO, Standard Chartered (Financial Times, 2013)
Source: Financial Times; Wall Street Journal
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
The development of Fintech
Unlocking the potential: the Fintech opportunity for Sydney
This marrying of technology with core financial services has been termed ‘Fintech’ and is seeing exponential
growth globally
Simply stated, Fintech is the application of technology (software, hardware and services) to financial services
■ Financial technology (or “Fintech”)
ranges from creating software to processes, that enable financial institutions to enhance their customer’s experience and
streamline their operations, or by consumers to fulfil their financial needs (saving, investment, make payments).
■ The Fintech sector includes - new start-ups (in financial technology), the activities and investment in technology innovation from established financial services
institutions, as well as ICT/technology providers – and collaboration between these parties or ‘disruptive innovation’ by any of them individually.
■ Growth in Fintech is being driven by a convergence of six key trends: 1) digitalisation of financial services (increase in electronic transactions); 2) falling cost of
computing and IT services; 3) need for cost reduction; 4) technology innovation; 5) ubiquitous data; and 6) changing customer behavior (proliferation of devices
and willingness to adopt new things).
Digitalisation
Falling cost of
computing
Cost reduction
Technology
innovation
Personal Finance – Tools to help individuals manage their wealth, including stock
portfolios, personal budgets and taxes.
Big Data & Analytics – Application of big data and advanced algorithmic techniques to
risk management, fraud detection, credit scoring, calculation of insurance premiums,
etc.
Areas of
Financial
Technology
(Fintech)
Ubiquitous data
Changing
customer behaviour
Payments – Technology and tools to facilitate transactions of virtual currencies and
mobile payments to eliminate processing costs.
Front Office – Tools and platforms that drive efficiencies into traditional banking
operations and practices such as loan origination, fundraising and sales etc.
Capital Markets Technology – Tools and platforms that enable buying and selling of
securities such as foreign exchange.
Source: KPMG analysis, Accenture
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
The development of Fintech
Unlocking the potential: the Fintech opportunity for Sydney
A more collaborative model of innovation in financial services has emerged, bringing together FIs,
Government, technology start-ups and investors
This is different to the traditional model, which typically sees financial institutions relying solely on IT vendors, as well as acquiring or funding
start-ups to meet their innovation pipeline:
Reliance by financial institutions on one or two
IT vendors for their technology innovation needs
Innovation is critical but risk
trade-off is high and often at
the cost of loss of market
perception and acceptance
Financial institutions
Traditional approach
Acquisitions or
Funding
Financial institutions
Emerging approach
Government support
Accelerator/
Incubator programs
New Fintech start-ups ready for
disruption and brimming with innovation
and creative ideas; funding and
mentorship key deterrents
Tech start-up
Tech start-up
VC funds
Overseas jurisdictions are witnessing an emerging model wherein multiple stakeholders collaborate via a duration-based
accelerator program to incubate and nurture a talented tech start-up in the financial space
Benefits for financial institutions
■ By introducing other stakeholders in addition to third-parties to manage
Benefits for start-ups
■ Tech start-ups benefit from access to funding, working spaces, sector
■
■
these programs, FIs are able to greatly reduce risk exposure while being
able to drive innovation and focus on other priorities, e.g. regulation
■
The opportunity to increase customer satisfaction and engagement
through digital disruption by embracing cutting-edge technology.
FIs are presented with the opportunity to engage with innovative startups and evaluate options beyond their traditional vendors.
guidance, and more importantly a privileged audience for showcasing
their offering.
■
Improving their understanding of how FIs operate and leverage the
knowledge gained into building a market-relevant product.
The support of an FI to help overcome its funding hurdles for R&D and
innovation continuity – reduces sole reliance on ‘informal’ funding
sources or VCs/PE firms.
Source: KPMG analysis
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
The development of Fintech
Unlocking the potential: the Fintech opportunity for Sydney
The Fintech sector is experiencing rapid growth globally, with financing activity predicted to rise from
US$3bn today to US$6-8bn by 2018
Fintech financing activity has grown substantially from around US$100 million in 2008 to US$3 billion in 2013
■
Fintech financing activity (US$)
3500
3000
400
Investments (US$M)
Deal Volume
500
2500
300
2000
200
1500
1000
100
0
500
2008
2009
2010
United States
Europe
2011
Asia-Pacific
2012
2013
Other
10%
10%
Global Investment
2009
2010
2012
2013
11%
26%
4%
33%
23%
9%
29%
Banking & corporate finance
7%
50%
6%
8%
49%
7%
10%
Capital markets
12%
46%
10%
28%
19%
Data analysis
Payments
■
6%
53%
4% 6%
32%
2011
5%
70%
6%
■
■
0
Fintech investment areas
2008
■
■
Fintech financing activity is currently
estimated at US$3 billion which is projected to
rise to between US$6-8 billion by 2018.
Fintech start-ups in New York have raised
around US$800 million since 2008, with
US$450 million only raised in 2013.
From 2008, the value of Fintech investment in
the UK and Ireland increased nearly eightfold
to US$265 million in 2013.
The US$346 million invested in Fintech
venture deals in Europe in the first six months
of the year is already more than double what
was raised in the whole of 2013 (US$145
million).
Payments, banking and corporate finance
currently represent the fields with the higher
investments in Fintech.
The upward trend of mobile devices and
cloud computing suggests that data analytics
and performance financial management will
keep growing and attracting investors.
14%
Personal finance management
Source: Pitchbook; Accenture; CB Insights
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
The development of Fintech
Unlocking the potential: the Fintech opportunity for Sydney
The Fintech sector is growing rapidly in profile and awareness globally
Banks Lure Fintech Startups With
Venture Funds
Banks Playing Larger Role in 2014
Fintech Funding
London’s ‘Fintech’ start-ups aim high
Banks are taking a wide range of
approaches in trying to keep up with the
wave of technology innovation that is
threatening to disrupt their sector.
Corporate venture capital firms have
been the biggest surprise of 2014 in
Fintech, according to experts in the
financial technology industry.
Financial technology start-ups in the UK and
Ireland raised more than $USD700m from
investors between 2008 and 2013.
Wall Street Journal, August, 2014
VC Investment in European Fintech Hits
Post-Dot-Com High
Venture capital investment in European
financial technology companies reached
its highest level in more than 10 years in
the first quarter of this year.
Bank Innovation, July, 2014
Fintech Investment Boom is an
Opportunity for New York to Lead in
Technology
New York is the fastest growing market for
financial-technology ventures in the US;
investment is set to double by 2018.
Wall Street Journal, April, 2014
Financial Times, August, 2014
Israeli Fintech start-ups get their
place in the sun
This week, Bank Leumi announced that it
was joining with other financial institutions,
both Israeli and foreign – such as Citi and
Mastercard – to develop new technologies
with Israeli Fintech start-ups.
Bank Innovation, July, 2014
Times of Israel, January, 2014
An explosion of start-ups is changing finance for the better
Is Silicon Valley the Future of Finance?
A wave of financial-technology firms, many of them just a few years
old, are changing the ways in which people borrow and save, pay for
things, buy foreign exchange and send money.
The Economist, August, 2013
Financial start-ups—known collectively as “Fintech”—are spreading like
kudzu, each with a different idea about how to usurp the giants of Wall
Street by offering better services, lower fees, or both.
New York Magazine, June, 2014
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
What is happening
globally and what
can we learn
Unlocking the potential: the Fintech opportunity for Sydney
Global Perspective
KPMG has identified eight key international locations that foster prosperous Fintech eco-systems
Three established centres (Silicon Valley, New York and London) command considerable resources and a strong population of innovative
companies and entrepreneurs. Emerging centres, including Sydney, have the potential to develop into global or regional hubs for Fintech.
66m
Dublin
Berlin
600m
London
Silicon Valley
1.5b
New York
Tel Aviv
Location and annual
Fintech investment USD
Hong Kong
Location only
Singapore
Sydney
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
Global Perspective
Established hubs
Silicon Valley and New York dominate the global Fintech landscape. Each has formidable assets and capabilities. However each has
limitations amongst the foremost are restrictive visa requirements. While Silicon Valley is the undisputed Fintech global capital today the lack of
a financial services industry may prove a limiting factor in the longer term, as Fintech start-ups seek closer proximity to financial services firm
Silicon Valley
■ Silicon Valley boasts a vibrant technology sector and is home to many of the
world’s best known companies. Against this backdrop Silicon Valley has
developed a formidable Fintech eco-system. Almost one third of global Fintech
investment in 2013 went to Silicon Valley companies.
■
■
Initial government support for the American defence sector in the 1930’s to
1950’s, as well as strong universities (e.g. Stanford) have played a key role in
establishing the valley. More recently successful repeat entrepreneurs and
availability of venture capital have played a key role in funding and establishing
new ventures. However Silicon Valley has a relatively small financial services
sector which may hamper long term primacy.
Approximately 11,000 people working in Fintech in the valley.
New York
■ New York is the second largest Fintech hub globally, with Fintech investment
growing rapidly (CAGR 31%), increasing twice as fast as Silicon Valley over the
past five years. However as deal volumes rise, deal value is diminishing which
may impact the ability of start-ups to attract latter stage funding.
■
■
■
New York is a world centre for financial services. As a result there is a ready pool
of financial services skills to feed entrepreneurial Fintech business. Other ‘tech’
businesses such as Google, Facebook, Amazon and eBay are growing in New
York which may impact the ability to attract quality engineering talent.
Approximately 43,000 people working in Fintech in New York.
The city’s relatively low Fintech profile affects its ability to attract influential capital.
Start-up Environment:
Start-up Environment:
Government
Support
Government
Support
Private VC Funding
Private VC
Funding
Skills / Talent
Skills / Talent
Business
Environment
Business
Environment
Funding Availability Profile:
Funding Availability Profile:
Start
Start
Launch
Build
Launch
Build
Scale
Scale
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Global Perspective
Unlocking the potential: the Fintech opportunity for Sydney
Established hubs
London is second only to New York as a global centre for financial services. The UK government is actively trying to foster development of the
Fintech sector. This investment has the potential to drive further development and innovation.
London
■
■
■
London is second only to New York in terms of global financial services.
The UK government is promoting London as a Fintech hub and actively
attracting investment and talent. This coupled with reasonable access to
funding, talent and a conducive business environment position the
Fintech eco-system in London for growth.
Private funding has been growing strongly (the 5 year CAGR in 2013
was twice the global average). Late stage funding/IPO options may
have been problematic in the past but are less of an issue today.
Approximately 44,000 people working in Fintech in London.
Start-up Environment:
Government
Support
Private VC
Funding
Skills / Talent
Business
Environment
Funding Availability Profile:
Start
Launch
Build
Scale
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
Global Perspective
Emerging centres - Europe
Dublin and Berlin are both promising centres with good access to technical skills. However both are challenged in terms of financial services
skills. Dublin suffers ‘brain drain’ to London while the financial services sector in Berlin is relatively underdeveloped. Start-ups in Dublin also
enjoy better access to capital.
Dublin
■ The Fintech sector in Dublin benefits from strong government support.
Mechanisms include pro-investment tax settings, to bespoke
services/support, and actively recruiting foreign talent.
■ It also has a network of angel investors and venture capitalists. The
government also supports inward investment from foreign investors.
Latter stage funding is harder to secure.
■ There is a strong education sector and a good supply of young skilled
workers (ranked #1 for the availability of skilled labour).
Berlin
■ Berlin has a robust education system and attracts young talented
people.
It has a good business environment and costs are modest by European
standards. However it lacks a strong financial services sector.
Government support for Fintech and entrepreneurship is limited but
may be growing.
■ Access to private funding and venture capital is also limited as are
sophisticated investors who can help guide entrepreneurs towards
success. This may present an opportunity for foreign investors.
Start-up Environment:
Start-up Environment:
Government
Support
Government
Support
Private VC
Funding
Private VC Funding
Skills / Talent
Skills / Talent
Business
Environment
Business
Environment
Funding Availability Profile:
Funding Availability Profile:
Start
Launch
Build
Scale
Start
Launch
Build
Scale
Source: IMD World Competitiveness Yearbook 2014
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
Global Perspective
Emerging centres - Asia
Singapore and Hong Kong are both vibrant financial services centres. Singapore is aggressively pursuing Fintech development. Hong Kong’s
proximity to China represents significant opportunities for financial services. Access to private sector VC investment remains a key hurdle for
both cities.
Singapore
Hong Kong
■
■
The Singapore government has invested heavily in the
promotion of an innovation eco-system through direct
investment, tax incentives, and measures to make
Singapore an attractive destination for entrepreneurs.
Singapore’s strategic location, conducive cultural and legal
factors, developed financial services sector and ICT
capabilities provide a fertile environment for Fintech.
However, early stage funding is not matched by funding
available later in the cycle.
■
■
■
■
There are a range of government incentives and services. The government is also
active in attracting foreign entrepreneurs however the visa process can be an
impediment and tax structures are less favourable than some other centres.
The local pool of venture capital is small but growing and foreign investors are
becoming more active.
The financial services and ICT sectors are well developed. Additionally, Hong
Kong has a strong entrepreneurial pedigree and a supportive business
environment.
Hong Kong is also a key gateway to the Chinese mainland which represents
significant a opportunity for financial services.
Start-up Environment:
Start-up Environment:
Government
Support
Government
Support
Private VC
Funding
Private VC Funding
Skills / Talent
Skills / Talent
Business
Environment
Business
Environment
Funding Availability Profile:
Funding Availability Profile:
Start
Launch
Build
Scale
Start
Launch
Build
Scale
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Global Perspective
Unlocking the potential: the Fintech opportunity for Sydney
Emerging centres – Middle East
Tel Aviv has spawned several successful technology ventures. Its strong technical capabilities are underpinned by skills developed during military
service. The incentives for Foreign Direct Investment (FDI) though the Yozma Fund are amongst the most generous seen globally.
Tel Aviv
■
■
■
The Yozma Fund has been offering generous incentives to attract foreign
investments for over 20 years. Tax breaks also exist for research and
development and the government supports entrepreneurs through events
and provision of shared working spaces.
A good education system and technical skills developed during mandatory
military service contribute to a strong skills base. Changes to make it
easier for foreigners to start a business in Israel are also under
consideration.
Almost 300 venture capital firms are active in Israel. Seed-stage funding
is a relatively small proportion of aggregate investment.
Start-up Environment:
Government
Support
Private VC Funding
Skills / Talent
Business
Environment
Funding Availability Profile:
Start
Launch
Build
Scale
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
Global Perspective
Comparison of government programs
With the exception of Silicon Valley (where the start-up eco-system
is self sustaining) all centres had government programs to incentivise
and support innovation.
Government support can be segmented into
four broad areas:
■
■
■
■
Direct assistance and funding
Concessional tax structures
Direct assistance and funding:
London
Singapore
Tel-Aviv
Visa and immigration policies
Relative to best-in-class
Other measures.
■
■
■
■
■
■
■
■
■
Within these categories there are a variety of
approaches and policy settings and no clear
leader.
■
■
Concessional tax structures:
London
Singapore
Tel-Aviv
Relative to best-in-class
■
■
■
■
■
■
Start-up loans for seed capital
Broad based 100% investment matching across early stages of
start-up lifecycle
Support for development of VCs
S$100 million early stage start-up funding
Up to 85% government investment in incubators
SPRING ‘Networking’ assistance from multiple agencies
Plans to scale back once eco-system is self sustaining
Start-up grants for seed capital (repayable via royalties)
Tnufa Program provides a grant for up to 85% of approved
expenses (capped at US$50k per venture)
Entrepreneurs Relief – 10% Concessional Capital Gains
EIS/SEIS - income tax relief and cap gains exemption
(until 2014)
Start-up partial tax exemption (3 years)
Corporate tax exception for 15 years (qualifying profits only)
Up to 400% deduction for innovation investment (S$400k cap)
Low tax environment
Tax breaks for VC accelerators and angel investors
Moves to simplify criteria for start-ups under three years old
(2015)
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
Global Perspective
Comparison of government programs
With the exception of Silicon Valley (where the start-up eco-system
is self sustaining) all centres had government programs to incentivise
and support innovation.
Government support can be segmented into
four broad areas:
■
■
■
■
Direct assistance and funding
Concessional tax structures
■
■
Visa and immigration policies:
■
London
Singapore
Tel-Aviv
Visa and immigration policies
Entrepreneur Visa scheme
Global Entrepreneur Programme to attract early stage
companies
Open Immigration Policy – easy access to Permanent
Residence
■
EntrePass flexible Visa for foreign entrepreneurs
■
Currently reviewing Visa policy
Relative to best-in-class
Other measures.
Within these categories there are a variety of
approaches and policy settings and no clear
leader.
■
Other measures:
■
■
London
Singapore
■
Tel-Aviv
Relative to best-in-class
■
■
■
Recent relaxation of IPO requirements – able to list only 10%
equity
Technology Strategy Board to oversee innovation programs
I-Class innovation accreditation for financial service
organisations
Government focus on key sectors
Start-Up Week (1,500 participants)
Go 4 Israel: the 12th edition of “go 4 Europe” conference
MIXiii: ‘Mix Israel Innovation International” – Israel innovation
conference
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Global Perspective
Unlocking the potential: the Fintech opportunity for Sydney
What we can learn from the global leaders
Our analysis of the global Fintech landscape has identified a number of leading and emerging hubs. From this we have identified a set of
common characteristics that can “enable” the development of a thriving Fintech sector in Sydney. There is a window of opportunity for
Sydney to position itself as the leading regional Fintech hub.
Our analysis of the different Fintech hubs (Silicon Valley, New York,
London, Dublin, Berlin, Tel Aviv, Singapore and Hong Kong) demonstrate
that in order to develop a strong Fintech ecosystem the following factors
are important enablers:
■
■
■
■
■
available and accessible early stage funding for Fintech start-ups and a
strong pipeline of opportunities for investors/VC funds;
depth of financial services and technology talent and close proximity of these
talent pools to each other (in city locations);
a robust financial services industry, with a vibrant technology start-up
community with mentoring, networking and high visibility;
Government commitment and regulatory support for the Fintech sector
specifically, and technology start-ups generally; and,
business backing for a Fintech hub, with high levels of collaboration and a
strong culture of knowledge-sharing and entrepreneurship.
One conclusion from the analysis is that those locations that perform strongly
across three or more of these factors we see clear evidence of strong Fintech
ecosystems. Silicon Valley, New York and London are notable examples of this.
In addition, there also needs to be aligned activity and coordinated action across
each of them. For example, the UK in particular have accelerated the
development of London as a Fintech hub over the past 18 months through a
concerted effort by the government, regulators, the City of London, technology
start-ups and industry.
Another key finding is that in some locations, notably Tel Aviv and
Silicon Valley, there is also a strong cultural drive to innovate and
that risk taking is not only acceptable but desirable and
encouraged.
It is clear that policy makers at city (or municipal) levels are closer
to the sources of innovation than those at a national level (in most
of the jurisdictions included in the analysis). For example, Berlin
has developed a vibrant ecosystem in the past few years without
systematic government support.
Fintech start-ups and technology start-ups generally suffer from a
lack of access to the relevant government agencies, often
hampered and delayed by having to deal with many stakeholders
this creates the potential for bottlenecks. Clear start-up contact
points in government and regulatory agencies can greatly assist
Fintech start-ups throughout their development.
As the competition for investment and entrepreneurial talent
reaches global proportions, city/municipal support for nascent
entrepreneurial clusters becomes a must-have, especially for large
metropolitan areas.
There are a number of implications for Sydney and NSW in terms
of the future competitiveness of the financial services industry.
There is also a window of opportunity for Sydney to position itself
as the leading regional Fintech hub, as Hong Kong and
Singapore, have not aligned efforts within their respective
jurisdictions around Fintech nor promoted themselves
internationally.
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Sydney
Fintech today
Unlocking the potential: the Fintech opportunity for Sydney
Sydney’s Fintech sector
Australia has examples of start-ups and successful businesses across key areas of the Fintech spectrum
Activity started picking up in 2007 with Australia boasting ~1,500 tech
start-ups by 2013
■
■
■
■
■
■
Sydney is the leader among Australian cities as a key hub for tech start-up
activity with over 950 businesses, followed by Melbourne (350 businesses)
Fintech makes up a small proportion of these businesses
Venture Capital is limited with two funds taking a direct interest in Fintech:
AWI and Reinventure. AWI Ventures runs the only dedicated Fintech
accelerator in Australia
As well as emerging players (e.g. SocietyOne and PocketBook), there are
established Fintech businesses too (e.g. OzForex and Tyro Payments)
There is limited participation from established firms in Fintech through
either accelerators or venture capital (Westpac being a notable exception)
Whilst back office support has moved to other parts of Sydney (e.g.
Kogarah and Parramatta) Fintech activity is mainly located in and around
the CBD
No. of tech start-ups in Australia*
Mapping Sydney’s
Fintech Hubs
“The Australian
tech start-up
sector has the
potential to
contribute A$109
billion or 4% of
GDP to the
Australian
economy and
540,000 jobs by
2033 with a
concerted effort
from
entrepreneurs,
educators, the
government and
corporate
Australia.”
MappingBarangaroo
Sydney’s Fintech Hubs
Equitise/MacroVue/Debt
to 10K/Simply Wall St^
Stockspot
AWI Ventures Accelerator
Sydney CBD
Innovyz
Reinventure
Darlinghurst
Pocketbook
LEGEND
1000
Surry Hills
800
Fintech start-up
600
400
VC Fund
950
200
Accelerator
350
105
30
0
Sydney
Melbourne
Brisbane
Perth
Note: *Represents approximate figures; ^Fintech start-ups operate out of Sydney CBD as part of the AWI Ventures
Accelerator Source: “The start-up economy - How to support tech start-ups and accelerate Australian innovation “,
Google Ventures & PwC (April 2013) accessed July 2014; Industry reporting; KPMG analysis
Note: *Represents approximate figures; ^Fintech start-ups operate out of Sydney CBD as part of the AWI Ventures Accelerator
Source: “The start-up economy - How to support tech start-ups and accelerate Australian innovation“, Google Ventures & PwC (April 2013) accessed July 2014; Industry reporting; KPMG analysis
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
Sydney’s Fintech sector
The Australian start-up ecosystem is still in its nascent stages, with most companies being one or two
person start-ups, although activity is picking up
Australia has an emerging Fintech start-up landscape across the full spectrum of Fintech areas, with many new emerging start-ups, as well
as more established successes
Personal Finance
Big Data & Analytics
■
■
■
■
■
Pocketbook provides personal
financial management solutions
Quantium allows businesses to
capitalize on the value of their
data and employs talent from
the best statisticians around
Australia
Payments
SocietyOne is Australia’s first
peer to peer lending network
StockSpot acts as an online
advisor, assessing a consumer’s
investment goals, risk tolerance
and recommends an appropriate
portfolio
Nimble allows consumers to
obtain finance within the hour
■
■
Front Office
■
■
Equitise is a new start-up that
provides crowd-funding
exclusively for SMEs in
Australia
Flamingo is a vendor
relationship management
platform that interfaces with an
organisations CRM platform,
and provides tools for
customers to manage their
vendors
Capital Market Technology
■
Pepperstone and OzForex are
both Australian online retail
foreign exchange brokers
specialising in foreign
exchange trading
Tyro Payments offer an
alternative merchant acquiring
solution and is Australia’s only
independent EFTPOS provider
CoinJar is Australia’s largest and
longest running bitcoin company
Source: KPMG analysis; Company websites
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
Sydney’s Fintech sector
More broadly, there are many examples of an emerging Fintech landscape, with most Fintech start-ups
originating from Sydney
Payments
Personal Finance
Big Data & Analytics
Venture Capital
Capital Market Technology
Accelerators &
Incubators
Middle and Back Office
Front Office
Source: KPMG analysis; Company websites
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
Sydney’s Fintech sector
This development is supported by a small number of new specialist Fintech venture capital
funds and accelerator programs
A critical dimension to the success of Fintech start-ups are venture capital funds and accelerator programs
Reinventure
■
■
In February, Westpac established its own limited partnership venture
capital fund. It hopes to fund about a dozen companies run by proven
entrepreneurs with proven business models. Westpac is the largest
investor in the Reinventure Fund. The fund is operated independently by
the managers, Danny Gilligan and Simon Cant, who are also co-investors
in the fund. This allows them to fully focus on helping the portfolio
companies succeed and, with A$50M in committed funds, they have the
resources to continue investing and stay engaged with companies as
they grow.
One area of focus will be companies that offer disruptive technologies
that might improve the traditional banking customer experience.
Reinventure makes investments from seed through to Series A and up.
For the right entrepreneur and the right idea, Reinventure will invest at
the company foundation stage.
Australasian Wealth Investment & AWI Ventures
■
■
Australasian Wealth Investment (AWI) is an investment company listed on
the ASX and focused on the financial services sector. AWI will hold equity
stakes (up to 100%) in operating businesses in four core thematics: digital
distribution; research and information; funds management; and trustee &
super services. AWI will also invest selectively in early stage businesses
through AWI Ventures where these businesses complement its core
operating businesses.
AWI Ventures invests in digital finance industry start-ups with a particular
interest in direct-to-consumer wealth management services. AWI Ventures
holds typically minority stakes in early stage, growing businesses that
have the potential to become successful and substantial enterprises and
potentially valuable partners for core AWI businesses. AWI Ventures is
building a portfolio of investments in digital financial services. To foster
genuine innovation in the digital financial services industry, AWI Ventures
has launched a start-up accelerator program. This is the only financial
services focused accelerator in Australia and one of the first in the world.
Source: KPMG analysis; Company websites
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Sydney’s Fintech sector
Unlocking the potential: the Fintech opportunity for Sydney
Sydney also has a fledgling Fintech community
Sydney has an emerging Fintech community with around 450 members that is already holding events (“Meet Ups”)
■
■
Sydney Fintech Startups Meetup, founded by Kim Heras in
2013.
Since its establishment they have held six ‘Meetups’ in
Sydney.
Source: Sydney Fintech Startups Meetup website
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
Sydney’s Fintech sector
Our local technology start-ups are gaining attention from offshore Governments, with some, such as
the UK targeting them to move to London
There are threats from other Governments, particularly the UK and Singapore in targeting the Australian technology start-up community,
to relocate their businesses offshore
■
■
■
■
UK Trade & Investment (UKTI) is the government department that helps
overseas companies bring high-quality investment to the UK’s economy.
It has recently published a document setting out the strengths of the
UK’s Fintech sector and the market opportunities for Fintech companies
in the UK.
The UK’s success indicates that a strong customer base, supportive
regulator, availability of capital and the financial services infrastructure all
make the UK offer attractive to Fintech companies. This evidence is
being used by UKTI to attract further potential Fintech investors to the
UK.
UKTI is launching a global roadshow to lure financial technology
companies to the country, as part of the government’s push to make
London a global centre for Fintech.
Representatives from the business trade body plan to travel to countries
including the US, India, Singapore, Germany, Scandinavia and Hong
Kong in a bid to attract Fintech companies to London. UKTI is looking to
attract both established Fintech providers and new, innovative start-ups.
■
Chancellor of the Exchequer, George Osborne recently announced a
range of measures promoting Fintech:
-
Consultation on a new strategy for Britain’s digital communications
infrastructure, to ensure the UK remains a leading digital nation and is
equipped to harness the emergence of Fintech.
-
A major new review examining how the technology that serves the
financial sector will evolve in the future, to be lead by the Government
Office for Science. Industry and academic experts will look at the
technologies, enablers and barriers that will shape the future of the
Fintech sector up to 2025, and the policy implications for the
government.
-
Proposal for a range of new awards and prizes to promote the
development of innovative finance solutions that help small
businesses access finance, co-sponsored by the British Business
Bank and Innovate Finance (UK Fintech industry association).
Source: KPMG analysis; UK HM Treasury; Australian Financial Review
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Key implications and
recommendations
Unlocking the potential: the Fintech opportunity for Sydney
Enabling conditions
The key implications for Sydney
Start-up Environment:
Government Support
Private VC Funding
Skills / Talent
Sydney
Business Environment
However, there are Australian examples of international success in Fintech
most notably in wealth management platforms and foreign exchange (e.g.
Bravura Solutions and OzForex).
Funding Availability Profile:
Start
Launch
Build
Scale
Applying the same analytical framework we have used to look at both leading
and emerging Fintech hubs, Sydney has the many of the required elements in
place but underperforms relative to global leaders.
One area where Australia does no perform as well is in regard to capital
availability, particularly post-GFC. This relative lack of capital available to new
firms in Australia is highlighted by the 2013 OECD venture capital statistics
which show that Australian VC totals just 0.02% of GDP, which can result in
start-ups that would otherwise operate domestically moving offshore for
funding.
Source: Innovation in Australia, Australian Centre for Financial Studies; KPMG Competitive Alternatives (2014)
This is a significant opportunity for Sydney and Australia. Financial services is
the single largest employer in the city and the Australian financial services
industry is well developed and mature across banking, wealth management
and insurance. Through Fintech, we can export our capabilities to the region
and globally.
Tax incentives for both start-up firms and investors can play an extremely
important role in building critical mass in a Fintech eco-system. Despite
reductions, tax is still an area in which Sydney falls behind other cities
competing for start-up capital both on a total tax and tax on R&D basis (ranking
44 compared to other international cities in an index of 51 cities in total).
Fintech also has the potential to disrupt established businesses and also
challenge Sydney’s place as a leading financial services centre. The need to
develop and foster Fintech is as much about responding to the disruptive threat
as it is about looking for growth opportunities for the Australian and State
economies.
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Enabling conditions
Unlocking the potential: the Fintech opportunity for Sydney
Building on our foundations
London provides a template for
Sydney to follow in terms of taking
concerted action across a range of
public and private sector
stakeholders to accelerate their
stated ambition to be the world
leader in Fintech
London is maximising its high concentration of financial services and technology talent as well as an
established hegemony in financial services. Action is being coordinated across business and government
through Innovate Finance and the UK Government (through UK Trade and Investment) is sending a
consistent message that London wants to lead the world in Fintech.
Policy settings have also been adjusted to allow for innovation and to support the growing Fintech
ecosystem (for example, the promotion of bitcoin and start-up specific regulatory frameworks).
Sydney can learn a lot by looking at London specifically for Fintech but cities like Tel Aviv and Singapore
also provide strong examples particularly in terms of government support for technology start-ups.
We have strong foundations in terms of financial services and access to skilled and capable resources
across financial services, technology, digital and creative industries, as well as a number of leading
universities and business schools.
For Sydney to have a vibrant and flourishing Fintech eco-system we need to focus on those enabling
conditions where we are strong and also seek to develop the areas where we are underweight.
This means we must leverage:
■
■
our concentration of and access to financial services and technology talent; and,
our clear leadership position in financial services.
Whilst also taking action to:
■
■
■
increase the availability of funding at both seed and venture capital stages;
build both government and business support for technology start-ups; and
foster a more entrepreneurial mind-set.
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Recommendations for the public and private sector
Unlocking the potential: the Fintech opportunity for Sydney
What Sydney needs to do
For Sydney to lead in Fintech we
need to take action that will build
and strengthen the pipeline of
Fintech business ventures looking to
call Sydney home.
This requires concerted aligned
action from both the public and
private sector.
We have identified a number of key enabling conditions for a successful Fintech sector in Sydney. These
are:
■
■
■
■
■
having a concentration of and access to financial services and technology talent;
increasing the availability of funding at both seed and venture capital stages;
building government and business support for technology start-ups;
having a clear leadership position in financial services; and
embracing a more entrepreneurial mind-set.
Maximising each of these conditions is essential to building a pipeline of Fintech business ventures. All play
a role to a differing degree in each of the cities included in the analysis.
London is consciously acting to take ownership of Fintech and use it to protect and enhance its place as a
leading global financial services centre.
Similar to London Sydney has a vested interest in maintaining our leadership in financial services. If we are
serious about maintaining a leading position in financial services locally and regionally it is imperative we act
now.
The steps we take to do so must clearly help to maximise our performance against each of the enabling
conditions and action must be aligned across the public and private sector.
This is not about backing winners and avoiding losers but creating optionality for Sydney and the financial
services industry in Australia.
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Recommendations for the public and private sector
Unlocking the potential: the Fintech opportunity for Sydney
What Sydney needs to do
There are six areas that warrant attention in order to position Sydney as a globally recognised, respected, attractive City for the emerging
Fintech sector
2. Commitment
1. Vision & strategy
■
■
■
Fintech start-up activity
tends to occur in large
metropolitan areas.
Establish a coherent
and supportive
entrepreneurial vision
and strategy for Fintech
at a city level (Sydney).
Consider Fintech in a
broader global financial
services context and
particularly Asia as an
export opportunity.
■
■
It is important for
government (and
regulatory agencies) to
publicly state their
commitment to
supporting the
development of the
Fintech sector.
Maximising the
opportunity will take
strong commitment
from government and
industry.
3. Alignment
■
■
To accelerate the
development of the
Fintech sector,
alignment and
coordination of activity
and investment is
required (government,
regulators, start-ups,
industry, academia).
Explore adjacent
opportunities and
benefits across sectors,
e.g. financial services,
ICT, professional
services.
4. Accessibility
■
■
■
■
Critical to any start-up
is access to funds and
expertise.
Beyond this there is
also a need for access
to regulators,
government and data.
Government providing
a single point of contact
for start-ups to remove
bureaucracy.
Sydney needs a clear
point of entry for
Fintech where various
stakeholders can come
together.
6. Promotion
5. Collaboration
■
■
■
A ‘centre of gravity’ or
physical focal point
needs to be established.
Fintech requires
established financial
services organisations
and new ventures to
come together.
Problems need to be
shared and safe
environments created to
truly foster innovation.
■
■
■
Financial services and
Fintech both need a
champion and voice at
local and global levels.
This needs to be at
both an industry level
and also at a political
level.
Promotion can be used
as an effective tool to
attract capital,
investment and the
best talent (locally,
regionally and
globally).
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Recommendations for the public and private sector
Unlocking the potential: the Fintech opportunity for Sydney
What Sydney needs to do
Recommended actions
Rationale
1. State Government to continue working with partners in the
private sector and the Committee for Sydney on the development of
a comprehensive Fintech vision and strategy for Sydney, providing a
focal point for the alignment of effort across the public and private sector
and articulating a clear commitment to the Fintech sector
■
2. Explore the establishment of a not-for-profit Fintech hub in the
heart of the city that co-locates technology start-ups, venture
capital and established financial services firms
■
■
■
■
■
■
Provides an aligned vision and goals for the development of the Fintech sector, as
part of the State Government’s support for financial services
Articulates the importance of and commitment to Fintech as a sector
Establishes the critical pathway and actions for success
Creates a critical mass and local ‘centre of gravity’ for Fintech in Sydney
Provides low cost services, e.g. working space and expertise for start ups
Provides access to low cost capital for start-ups, as well as a pipeline of opportunities
for venture capital and established financial services firms
Drives collaboration between start-ups, established financial services firms, as well as
regulatory agencies
3. Government (local, state and Commonwealth) to promote
Sydney as the leading Fintech centre in the ASPAC region and
establish a series of events in the city, regionally and globally, to
showcase Fintech in Sydney, in line with our leading financial services
position
■
■
■
■
Establishes a platform to promote Fintech in Sydney and globally
Raises awareness for Fintech start-ups to export their capability offshore
Attracts funding and venture capital to Sydney
Attracts entrepreneurial talent to Sydney
4. Form an independent Fintech focussed industry association,
based in Sydney, to give the sector a strong voice and champion
■
■
■
Helps to prioritise the needs of the sector (liaising with Government and regulatory
agencies) and provides a representative voice for the Sydney Fintech community
Promotes Sydney as the ‘centre of gravity’ for Fintech in Australia and regionally
Drives collaboration between financial services firms and Fintech start-ups
5. Work with the Federal Government and regulatory agencies, to
enhance the current regulatory, tax and business incentives
available to the start-up community, as well as introduce measures
to target foreign entrepreneurs, attracting them to Sydney
■
■
■
■
Provides a regulatory and tax framework that supports innovation
Helps to broaden the entrepreneurial culture base
Attracts funding and venture capital to Sydney
Attracts entrepreneurial talent to Sydney
6. Engage the university sector and leverage research institutes,
such as the Centre for International Finance and Regulation (CIFR)
to research key Fintech themes and explore business opportunities for
commercialisation
■
■
■
Develops ideas and business opportunities for commercialisation
Connects the university sector, the Fintech start-up community and business
Leverages existing infrastructure, such as CIFR
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Appendix
Unlocking the potential:
the Fintech opportunity
for Sydney
Context:
Macro-level trends
Unlocking the potential: the Fintech opportunity for Sydney
Macro-level trends
Strategic imperatives for financial institutions and evolving consumer behaviours, in part driven by new
technology, has been a catalyst for innovation
Post-GFC, financial institutions globally have recognised the need to
work smarter and be more customer-centric, while the consumer
space was seeing a disruptive change of its own
1
■
■
■
■
Driving revenue steams while lowering costs was a priority:
Financial institutions (FIs) realised that by using innovative technology
solutions, they were able to not only achieve scale, but also be more
efficient. Use of automated procedures and the introduction of nonbranch channels drastically cut employee costs, while allowing financial
institutions to grow their customer base.
Improving the customer experience was also key: Technology was
a means to develop innovative financial solutions. FIs began to record
customer data to gain deeper insight into their clientele. They were able
to drive loyalty by predicting customer behaviour, anticipating the need
for new products and risk of attrition. This allowed FIs to improve the
customer experience.
2
■
For Financial institutions…
■
For Customers…
The digital revolution was in full steam: As streaming data and
cloud storage rapidly replaced CDs and DVD, the need for personal
banking and payments emerged as a strong consumer and business
need.
Mobile device proliferation: The ubiquity of mobile devices further
fuelled this need and changed the financial and transactional
experience (and expectations) of consumers.
Source: KPMG analysis
Financial institutions realised that they needed to cope with a
challenging business environment, and in parallel, the advent and
proliferation of mobile devices led to users to demand advanced
financial solutions
Technology acted as the key enabler, and bridged the gap between the
FI’s current state and the customers’ need
■
The Catalyst
“
■
During the GFC, there was a mass exodus of
banking and finance employees who had the
know-how, funds and an entrepreneurial mindset to try new things
These ex-employees began to focus on
technology to try and solve some the industry’s
biggest challenges
I think the City of London has a large part to play in the UK's
dominance in Fintech. Banks were shedding staff during the
recession, but we're seeing people who were experts in a big
bank and had nice bonuses, some savings and strong expertise.
They've come out with interesting plays that leverage cloud
infrastructure and their own knowledge. They've become
experts to the sector, rather than one particular bank. It's the
best type of spinout really.
”
Alex McCracken, Director –
Venture Services, Silicon Valley Bank
(UK Branch)
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
The changing industry
landscape
The changing industry landscape
Unlocking the potential: the Fintech opportunity for Sydney
Disruptive innovation has created new ways of doing business, which destroyed or severely damaged old
existing giants
Innovation plays an integral role in growing a nation’s economy, employment and standard of living through the development of new products,
processes and fledgling industries. Business leaders know that the speed of development is such that they have to keep innovating and
changing faster to remain competitive
■
■
■
■
“Thomas Edison performed 9,000 experiments before coming up with
a successful version of the light bulb”.
Average number of years a company spends in the S&P 500 index
The US has proved to be more entrepreneurial than Europe in large
part because it has embraced a culture of “failing forward” as a
common tech-industry phrase puts it: in Germany bankruptcy can end
your business career whereas in Silicon Valley it is almost a badge of
honour.
Companies must recognise the virtues of failing small and failing fast,
like placing “little bets”.
Placing small bets is one of several ways that companies can limit the
downside of failure.
Source: The Economist, April 14, 2011
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All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
The changing industry landscape
Companies such as Google see investments in
start-ups as a core part of their strategy to remain
at the forefront of innovation
Active Investors in Silicon Valley Fintech companies: 2009-2013
Rank
Investor
Type
1
Google Ventures
Corporate Venture
1
Andressen Horowitz
Venture Capital
3
First Round Capital
Venture Capital
4
SV Angel
Venture Capital
5
True Ventures
Venture Capital
5
Crosslink Capital
Venture Capital
5
Felicis Ventures
Venture Capital
5
DAG Ventures
Venture Capital
9
Citi Ventures
Corporate Venture
9
Sequoia Capital
Venture Capital
9
Redpoint Venture
Venture Capital
9
Khosla Ventures
Venture Capital
9
Dill Capital Management
Venture Capital
9
Kleiner Perkins Caulfield & Byers
Venture Capital
9
Lightspeed Venture Partners
Venture Capital
9
Greylock Partners
Venture Capital
9
500 Startups
Venture Capital
Google Ventures was established in 2009 to help entrepreneurs through
investment and support, starting off with an initial US$100 million per year
in the US which has increased to US$300 million invested in over 250
companies. Up until recently Google Ventures has focused its investments
on Silicon Valley companies, however, it is now expanding globally, recently
announcing a US$100m European based arm of Google Ventures.
Global financial institutions are recognising that new business models are
developing and that they don’t often fit inside their current operating model and see investing in start-ups as a way to position themselves against the
threat of digital disruption
Source: KPMG Desktop Research
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All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
The changing industry landscape
Unlocking the potential: the Fintech opportunity for Sydney
Australian financial institutions have been amongst the most innovative globally, adopting a range of
strategies and initiatives
Australian financial institutions are seen as leaders in embracing innovation and have launched a number of strategic initiatives over the past
five years, particularly in mobile banking, payments and online
NAB launch of UBank
■
UBank was launched in 2008 as banks were really
starting to come to terms with digital disruption.
This was a way for NAB to test and learn with
digital.
ANZ launch of goMoney
■
ANZ’s goMoney mobile app was launched in 2010
and now has more than 1.4 million users, has hit
A$100 billion in transactions and a million logins a
day.
CBA launch of Pi, Albert and Leo
■
CBA launched a range of offerings in 2012 for
small businesses with new point-of-sale (POS)
capabilities (Leo), enabled through a new software
platform (Pi) and a new omni-commerce device
(Albert)
Westpac investment in Reinventure
■
In 2014, Westpac invested A$50 million in a
venture capital fund, Reinventure and through this
making investments in early stage start-ups. For
example, Westpac made a A$5 million investment
in peer-to-peer lender, SocietyOne.
Source: KPMG Desktop Research; Company websites
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Global perspective:
comparison of
established and
emerging Fintech hubs
Unlocking the potential: the Fintech opportunity for Sydney
Global perspective
The UK is leading efforts globally to support the
development of Fintech and has made substantial
progress over the past 18 months…
A strong commitment has been given by the UK Government to the
advancement and support of the Fintech sector
Government
“
I’m here today because I want the UK to lead the world in
developing Fintech. That’s my ambition – short and sweet…
…There is fierce international competition for this growing
industry. And you need the right support from government to
win this global race – you need the best investment
environment, the right tax system, the appropriate regulatory
rules, the best infrastructure, and a government that gets out
there in the world and sells your products and services.
George Osborne,
Chancellor of the Exchequer
”
■
■
■
■
■
■
£100 million extension of the British Business Bank’s successful
Investment Programme, which addresses long-standing gaps in the
finance market for smaller businesses and promotes a greater choice in
their supply of lending, including in the Fintech sector. The British
Business Bank has already committed over £100m to Fintech firms
through the complete range of its programmes.
The UK Government will allow peer-to-peer lending in Individual Savings
Accounts.
The Small Business Bill will require that large banks provide the details
of SMEs that are rejected for lending by promoting alternative lenders.
British Business Bank and Innovate Finance will collaborate in a joint
effort to increase SME lending by promoting alternative forms of funding,
including peer-to-peer and equity crowd-funding.
The UK Government will explore the opportunities, risks and potential
regulation of virtual currencies and digital money.
Have established a Financial Services Trade and Investment Board,
bringing together government and industry to attract inward investment,
promote external trade and remove restrictions of the UK’s financial
services sector.
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
Global perspective
One of the key features of the UK’s success, has been the strong alignment of effort across various stakeholders
The UK have achieved a strong alignment of efforts, across Government, Regulators, Fintech start-ups and industry
Trade and Investment
Hub
■
■
■
■
■
UKTI has set a clear focus on increasing the export of UK financial
services technologies, as well as attracting more foreign and domestic
investment into the sector.
Fintech is one of the top priorities for the UK’s recently established
Financial Services Trade and Investment Board.
Have developed a strategy to ensure the UK is the destination of choice
for companies that want to establish a global presence in Fintech.
Have personnel ‘on the ground’ in Australia promoting the UK to local
Fintech start-ups.
■
■
Level39 was established by the Canary Wharf Group and opened on
2013 by Boris Johnson, Mayor of London, quickly becoming Europe’s
largest accelerator space.
It provides a space for early-stage Fintech businesses that have
potential for high-growth. It plays host to innovation and accelerator
programmes – these are short programmes that aim to boost a young
company’s growth over a concentrated period of time.
It boasts a 250 seat event venue, four hi-tech sandboxes and an
executive boardroom.
Regulatory
Fintech Trade Body
■
■
■
■
The Financial Conduct Authority (FCA) has recently announced ‘Project
Innovate’, an initiative to support industry innovation by smaller start-ups
through to established firms with new business models.
The FCA’s policy unit is engaging with firms developing innovative
approaches not explicitly covered by regulation, or for which application
of regulation is ambiguous.
Will be launching an ‘incubator’ to support innovative small financial
businesses as they prepare for regulatory authorisation.
Education
■
■
■
In late 2014 coding will be introduced to the school timetable for every child
aged 5-16 years old, making the UK the first major G20 economy in the
world to implement this on a national level.
This is a landmark policy change that will arm a generation of schoolleavers with the skills for the 21st century.
Year of Code is an independent, non-profit campaign in the UK to
encourage people across the country to get coding for the first time in 2014.
■
■
Innovate Finance, an industry body established to promote the interests
of the UK’s rapidly growing Fintech sector, was launched in August,
based in London.
The body aims to be the voice of a new Fintech movement and has over
50 founding members. It will provide a single point of access to key
industry influencers, clients, technologies, talent, finance and
international marketplaces.
It is supported by the City of London Corporation, as lead sponsor.
Industry
■
■
UK banks are launching Venture Capital funds and/or accelerator
programs targeting Fintech start-ups, e.g. HSBC, Barclays.
Fintech Innovation Lab was launched in 2013 supported by Accenture
which provides a 12-week mentorship program, bringing together young
Fintech start-ups with senior executives from 13 of the world’s leading
banks. Innovation Labs exist in London, New York and ASPAC.
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
The importance of the
financial services industry
Unlocking the potential: the Fintech opportunity for Sydney
The importance of the financial services industry
The Australian financial services industry contributes the highest share of sector gross value added to the
economy and employs 420,000 people
Annual GVA and share of the top two contributors – “Financial and Insurance Services” and “Mining” (A$ billion)
GVA at current prices, A$ billion
■
Financial
Services
1,002
608
8%
5%
87%
644
8%
6%
86%
8%
5%
87%
730
8%
5%
87%
919
9%
847
8%
8%
786
8%
7%
8%
4%
5%
88%
87%
85%
11%
1,175
CAGR 6.8%
690
1,313
CAGR
7.1%
Total GVA at
current prices
1,392
1,089
9%
9%
10%
1,205
9%
9%
10%
1,423
9%
8%
10%
9%
■
8%
■
8%
■
84%
84%
81%
83%
81%
82%
82%
■
June
2000
June
2001
June
2002
June
2003
June
2004
June
2005
June
2006
Financial and insurance services
June
2007
June
2008
June
2009
Mining
June
2010
June
2011
June
2012
The Australian economy has shown robust growth with GVA increasing
at 6.8% CAGR over the past 13 years. During this time, financial and
insurance services sector has grown at a CAGR of 7.1% (amongst the
top two growing industries), constantly maintaining its share of around 89% of the total GVA since 2000.
As of June 2013, Financial and insurance services, along with mining,
are the highest value-adding industries in the economy, accounting for
over 9% each of the nation’s value added numbers.
The financial services industry employs 420,000 people, with the
overwhelming majority in high skilled, high wage occupations.
According to the ATO, there are 2,965 tax payers in the banking and
finance industry, who paid A$11.5 billion in tax, and this contributed to
approximately 23% of the Public Groups and International income tax
collections for the 2013 tax year and around 18% of total corporate tax
receipts in Australia.
Treasury’s Economic Roundup confirmed that the average tax rate for
the financial services sector has been higher than most other industries
for at least the past six years.
June
2013
Others
Source: Australian Bureau of Statistics, Cat. No. 5204.0 Australian System of National Accounts, Time Series Workbook, Table 5 (last updated 1 Nov 2013); Australian Taxation Office, Banking and Finance Industry
Strategy for 2014-15; FSC Submission to the 2014-15 Federal Budget; Treasury, Economic Roundup Issue 2, 2011).
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
The importance of the financial services industry
Australia has a mature, well regulated and
diversified financial sector
Total financial sector assets
100% = A$5,237 billion
Other managed
funds
5%
Securitisation
vehicles
3%
Life offices and
superannuation
funds
28%
Registered
Financial
Corporations
3%
Authorised
deposit-taking
institutions –
Banks
60%
Authorised deposittaking institutions –
Other
1%
■
■
Australia has a sophisticated profitable banking sector and a well established
regulatory environment. The four major banks are all in the World’s largest
banks by market capitalisation, all rank in the top 20 of the World’s 50 safest
banks, and are amongst the most profitable banks globally.
Australia has favourable economic fundamentals and a strong and growing
financial services sector that has demonstrated resilience and outperformed
other advanced economies during and post the Global Financial Crisis (GFC)
period.
World’s top 25 banks by market capitalisation (US $billion)
Wells Fargo
J.P. Morgan
ICBC
HSBC
Bank of America
China Construction Bank
Citigroup
Agricultural Bank of China
Bank of China
Commonwealth Bank of Australia
Banco Santander
Allied Irish Bank
Westpac Banking Corporation
BNP Paribas
Royal Bank of Canada
Lloyds Banking Group
Toronto Dominion Bank
Australia New Zealand Banking Group
Mitsubishi UFJ Financial Group
US Bancorp
UBS AG
National Australia Bank
Goldman Sachs
Bank of Nova Scotia
Itau Unibanco
■
■
$261
$229
$196
$191
$181
$160.8
$144
$126.4
$115.9
$115
$110.5
$100
$99.2
$96
$95.1
$90.1
$86.5
$83.2
$78.4
$78.1
$78
$75.5
$74.1
$70.5
$70.4
On the global stage, the World Economic Forum rates Australia as one of the
world’s best performing global financial centres. It is ranked number one in
Asia and number two in the world - above places like Hong Kong and
Singapore. This is in large part due to our performance, efficiency, stability
and low-risk profile.
Australia has the fourth largest pool of investment fund assets in the world
and the largest in Asia. As a result of compulsory superannuation (pension)
fund contributions, total consolidated funds under management grew to
almost A$1.6 trillion as at 2013, up by more than 60% on five years ago.
Source: RBA Statistical Tables, B1 Assets of Financial Institutions (latest Sep 2013), updated 2 Dec 2013; RBA Statistical Tables, D2 Lending and Credit Aggregates (Oct 2013), updated Nov 2013; Bankscope;
Bank for International Settlement – 83rd Annual Report`; World Economic Forum; Market capitalisation of global banks at March, 2014
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
The importance of the financial services industry
Sydney is home to most of the Australian and foreign-owned financial institutions, as well as the financial
regulators, central bank and stock exchange
Summary of Branch and Head Office (HO) Locations in Australia
Major Domestic Banks
NSW
VIC
QLD
WA
SA
NT
ANZ
ü
ü(HQ)
ü
ü
ü
ü
CBA
ü(HQ)
ü
ü
ü
ü
ü
NAB
ü
ü(HQ)
ü
ü
ü
ü
WBC
ü(HQ)
ü
ü
ü
ü
ü
Macquarie
ü(HQ)
ü
ü
ü
ü
û
Foreign Subsidiary Banks
NSW
VIC
QLD
WA
SA
NT
Arab Bank Australia Ltd
ü(HQ)
ü
û
û
û
û
Citigroup Pty Ltd
ü(HQ)
ü
ü
ü
ü
û
ING Bank Australia Ltd
ü(HQ)
û
û
û
û
û
Rabobank Australia Ltd
ü(HQ)
ü
ü
ü
ü
ü
Bank of Sydney Ltd
ü(HQ)
ü
û
û
ü
û
Bank of China (Australia) Ltd
ü(HQ)
ü
ü
ü
û
û
HSBC Bank Australia Ltd
ü(HQ)
ü
ü
ü
ü
û
Foreign Bank Branches
NSW
VIC
QLD
WA
SA
NT
Head Office distribution (42 in total)
92%
5%
3%
-
-
-
Other Major Financial Institutions
NSW
VIC
QLD
WA
SA
NT
AMP
ü(HQ)
ü
ü
ü
ü
û
IAG
ü(HQ)
ü
ü
ü
ü
ü
QBE
ü(HQ)
ü
ü
ü
ü
ü
■
■
■
■
Two of the four major
banks, CBA and
Westpac, are based in
Sydney, with NAB and
ANZ also having
significant operations in
Sydney.
All of the foreign-owned
subsidiary banks and
most foreign bank
branches have
established head offices
in Sydney.
9 of the 10 largest
Australian fund
management groups are
headquartered in
Sydney.
Sydney is also the head
office location for
financial services
regulators, APRA and
ASIC, as well as the
central bank, the
Reserve Bank of
Australia and stock
exchange (e.g. ASX).
Sources: APRA; Company website; Factiva news database
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All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
The importance of the financial services industry
The Financial System Inquiry has recognised that the catalyst for technological innovation often starts
outside of the industry
The Financial System Inquiry (FSI) Interim Report acknowledged the importance of technological innovation to the continued growth and
efficiency in the Australia economy, benefiting consumers and businesses
Observation
Policy options
■
■
■
■
■
■
Technological innovation is a major driver of efficiency in the financial
system and can benefit consumers. Government and regulators need to
balance these benefits against the risks, as they seek to manage the
flexibility of regulatory frameworks and the regulatory perimeter.
Financial services boundaries are shifting as technology enables new
competitors from inside and outside the sector, new business models
and new services. Trends, such as the increasing adoption of cloud
technology and financial institutions using growing amounts of data,
provide opportunities for increasing financial system efficiency.
Over the medium term, technology will increasingly affect the level of
competition in the financial system. In some ways, technology is
improving competition. It enables consumers to compare and switch
between products, making new business models, such as online-only
banks and peer-to-peer lenders, viable.
Technology, including automation and ‘mass customisation’ techniques,
provides an opportunity to offer consumers more cost-effective advice. It
may also enable new business models, such as scaled or automated
online advice.
Government is well-positioned to facilitate innovation through
coordinated action, regulatory flexibility and forward-looking
mechanisms.
■
Establish a central mechanism or body for monitoring and advising
Government on technology and innovation policy and to promote
innovation in Australia’s financial system. Consider, for example, a
public-private sector collaborative body or changing the mandate of an
existing body to include technology and innovation.
Developing a comprehensive Government strategy, in consultation with
industry, to ensure the regulatory framework supports technological
innovation, while managing risks.
“
Many technological developments adopted by financial
institutions start life outside the sector…In many ways, this
pattern of taking up new, but tested, technologies benefits the
sector: it lowers the risk of innovation, while taking advantage of
its benefits.
.
”
FSI Interim Report
Source: Financial System Inquiry Interim Report (2014)
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
The importance of the financial services industry
Given the rising importance of developing digital economies, Fintech could be an enabler to greater
exporting of Australia’s financial services capability
The FSI and the ‘Johnson Report’ (Australia as a Financial Centre) highlight that Australia has not been able to generate significant exports of
our financial services capabilities to other markets and we need to more effectively promote the strengths of our financial services sector
internationally
Observation
■
■
■
■
■
While Australia’s financial sector as a proportion of its economy is large
by international standards, financial services exports only represent a
small proportion of Australia’s trade, accounting for around 4.5% of total
trade in services at the end of 2013.
A key finding of the Johnson Report (2009), Australia as a Financial
Centre, that Australian exports and imports of financial services are low
by international standards. Fintech offers the opportunity to boost our
trade in financial services, given the rising importance of developing
digital economies throughout the region and globally.
Another finding was that Australia needs to more actively and effectively
promote the strengths of its financial sector and Fintech could provide a
platform for this (regionally and globally).
UKTI has announced a significant new push in overseas markets to
promote Britain as the best place in the world to set up and develop a
Fintech firm, and attract inward investment to the sector.
There are examples of successful Australian Fintech companies
expanding internationally, including Bravura Solutions who started their
operations in Sydney in 2004, and Oxforex, who started their operations
in Sydney in 1998.
“
Given the anticipated development in Asian financial markets in
coming decades, and the strength and significance of
Australia’s trade relationships with the region, opportunities will
increasingly arise to access capital from Asia, for Australian
and Asian financial services firms to expand into each other’s
markets and to grow financial services exports and imports…
.
”
FSI Interim Report
“
…Australia has arguably the most sophisticated and advanced
financial sector in the region. However,
while Australia is a very open trading economy overall, our
exports and imports of financial services
as a percentage of GDP are, by international standards, low.
The opportunities for leveraging off our financial services skills
and expertise, in the region and beyond, are potentially
enormous
.
”
Johnson Report
Source: Australian Financial Centre Forum (2009); Financial System Inquiry Interim Report (2014); Company websites
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Sydney’s Fintech sector:
case studies
Unlocking the potential: the Fintech opportunity for Sydney
Case studies
SocietyOne (Peer to peer lender)
When Matt Symons was asked about the future of Fintech in Sydney and how
Sydney could compete he started by talking about his own experience in San
Francisco and the cultural differences he observed compared to Sydney: “In
San Francisco the starting premise for talented and ambitious individuals is
that if you are still working at Wells Fargo in your late 30’s to early 40’s you
will be defensive (about that)”. Matt’s point is that the psyche and attitude in
the US is one of “the glass being half full” and that even individuals in
conservative sectors like financial services have an appetite for risk.
“Examples of the possible are held up every day. Paypal is the jewel in the
eBay crown. Square is a household name. Either you disrupt or someone
disrupts you.”
And it is this approach to disruption and seeing what might be possible that
led Matt and his business partner Greg Symons to establish SocietyOne.
Their company website will tell you that “SocietyOne is Australia's only active
peer-to-peer lending platform – connecting borrowers and investors in a
secure, safe and confidential online environment.” They do this by exploiting
the limitations within existing consumer credit models for things such as
unsecured credit on personal loans and credit cards where the lending rate is
set regardless of the personal circumstances of the customer. So someone
with a good credit history will pay the same rate as someone with a bad credit
history for the same product. What SocietyOne does is seek to offer a rate
that better reflects the history of the individual by using a risk adjusted pricing
model. Funding comes from high net worth investors. Essentially
SocietyOne are opening up a section of the financial services market to
investors that has been the traditional domain of the banks whilst also offering
a better customer experience.
Since starting the business in Australia Matt noticed that “it can be quite
lonely (as a Fintech entrepreneur). No-one reached out as a peer. There is
no obvious alumni of others to interact with.” Again this was contrasted with
San Francisco where people will reach out to each other. Angel and SuperAngel investors will look to connect new start-ups with both ideas and
mentors. Whereas “in Australia there is a lack of structured support which at
the business level can be very isolating”.
One thing that would work towards building a supportive ecosystem in Matt’s
view is attaining a critical mass of Fintech start-ups and venture capital
across the full range of financial services (banking, wealth management,
insurance, private equity and real estate). Success in one or all will breed
future businesses because “here Fintech is seen as a career risk. But when
people see disruption occurring and succeeding this becomes a signal that
Fintech has a future.” To help attain critical mass you need to attract talent.
Talent that is “comfortable in unstructured environments, people who can be
productive and lead which is a rare talent.”
Matt would also like to see the city showcase Fintech. To celebrate the “new
and different developments in Fintech independent of where it has come from,
whether its CBA, BT Financial Group or a 3-man shop. Both Google and
Apple focus on what might be, the art of the possible and doing things
differently in hitherto unimagined ways. It’s time Sydney did the same.”
“
In Australia there is a lack of structured support which at the
business level can be very isolating.
”
Matt Symons, CEO, SocietyOne
Source: Company Website July 2014, AFR article 11 March 2013 “ Online Credit fills the gap”, KPMG interview with Matt Symons 11 July 2014
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
Case studies
Tyro Payments (Payments provider)
Andrew Rothwell is a founding engineer of Tyro Payments Ltd. A Fintech
business focussed on disrupting the payments value chain in Australia by aiming
to provide a better end to end customer experience than established players.
Tyro was established in 2003 by Andrew, Peter Haig and Paul Wood to take
advantage of the RBA’s bank licence for merchant acquiring. All three had deep
technology backgrounds having worked for technology giants such as IBM and
Cisco as well as entrepreneurial backgrounds having run their own companies:
Systems Technology, Netlink and Metaplex which was subsequently acquired by
Cisco.
At Cisco they took on business development and engineering roles that meant
they spent a lot of time in Silicon Valley and Research Triangle Park in North
Carolina. One consequence of this is what Andrew described as “living in the
Internet whirlwind and experiencing the start-up mentality up close”; providing
direct exposure to the entrepreneurial culture; and “whatever it takes” attitude of
the time. Their Cisco lives meant spending a lot of time away from their homes
and families in Sydney. They were “working 16 hour days and living out of a
suitcase. After years of this we were getting burned out. We wanted to live and
work in Sydney with our families.” So they started to think about a new venture
based in Sydney. “We saw (merchant) acquiring as an activity that could be
disrupted using technology: combining Internetworking with inexpensive
commodity server hardware and leveraging the emergent open source software
movement meant we could build a much lower cost platform, with better speed,
scalability, security and resilience, than was available by the legacy platform
providers. We believed marrying such a platform with an acquiring bank licence
would enable us to provide great value to Australian merchants.”
However, Andrew and his fellow founders had underestimated the regulatory
environment and challenges to be overcome in terms of the financial risk
management, operational risk management, governance, security and other
needs mandated by APRA, APCA and PCI in the payments space. At the time
Visa and Mastercard required prospective members to hold a bank license, Tyro
could not become a member of either until the specialist bank license was
granted.
Nor could Tyro be a member of or participate in the RBA Tier 1 settlement
system until the license was granted. The other major hurdle was gaining
access to the EFTPOS network. Connecting with EFTPOS member banks
proved extremely costly and time consuming. The access regime did not
necessarily promote easy access for new entrants. Tyro relied on support from
the RBA to battle through many of these problems. “Without their support in the
early years it is unlikely we would have survived.”
An early business plan had the first beta product being launched in late 2004
whereas in reality it wasn’t until the latter half of 2006 that the first “super-green”
product was launched after almost A$10m of investment in product
development costs, scheme membership costs, EFTPOS access regime costs,
APRA licencing costs and other regulatory requirements. “Looking back, if we’d
known about the regulatory hurdles, access regime dramas and cost and time
to overcome them we probably would not have tried (to establish a payments
business).” In total it took A$33m and 9 years to be cash flow positive.
Another key moment was the appointment of Jost Stollmann as CEO. A serial
entrepreneur who had established and built his own US$1bn business in
Germany (CompuNet Computer AG) brought the experience needed to grow
the business, much needed capital and also the ability to attract a high quality
board, including Paul Rickard (ex-CBA) and Mike Cannon-Brookes (Atlassian).
Today Tyro employ 130 people and in the last year carried some $5.3bn of
transactions and have over 10,000 merchants as customers. The Tyro story
shows the importance of perseverance, the willingness to innovate and need for
the regulatory environment to support new business ventures in Fintech.
“
We believed marrying such a platform with an acquiring bank
licence would enable us to provide great value to Australian
merchants
”
Andrew Rothwell,
Founding Engineer, Tyro Payments
Source: Company Website July 2014, KPMG interview with Andrew Rothwell 5 August 2014
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
Case studies
Reinventure (VC fund)
Danny Gilligan and Simon Cant are the co-founders of Reinventure, a corporate
venture capital fund backed by Westpac. Danny describes the fund as “creating
long term strategic options for the bank as well as a near term opportunity to
partner with innovative companies to leverage new technologies and know-how”.
The Reinventure model is about “doing Corporate VC in a way that is attractive to
good entrepreneurs.”
Reinventure operates as an independent corporate venture capital unit in
partnership with the bank. Established as a fully registered Early Stage Venture
Capital Limited Partnership (ESVCLP) Reinventure is regulated under both the
Venture Capital Act 2002 and Income Tax Assessment Act 1997. The structure
ensures that Reinventure can operate autonomously from the bank, which provides
entrepreneurs with comfort that, as an investor, Reinventure will not subsume the
interests of the venture to those of the bank. At the same time, the exclusive
partnership with Westpac ensures that they are able to facilitate a relationship of
deep trust between their ventures and Westpac over time.
The operating model for the fund is underpinned by a number of core business
principles designed to enable Reinventure to “de-risk corporate venture capital.”
The first is to focus on proven models. These can be either proven in terms of
demonstrated traction with customers or by a model that has gained traction in
another market. The second principle is to “work with proven entrepreneurs,
people who have built businesses before.” The final ingredient for success is
looking for “where Westpac can provide a material advantage, we will never invest
just cash.” This means they are focussed on how Westpac can help the start-up to
grow as opposed to how the start-up can fill a gap in Westpac’s corporate strategy.
The first investment the fund made was into SocietyOne and clearly fits with the
above principles in that it has a “proven business model, proven entrepreneurs and
Westpac can provide a material advantage”.
Longer term the ambition is “for Reinventure to be the preferred Corporate
Venture capital fund for great entrepreneurs pursuing market leading
Fintech ventures.”
Locally they see a great opportunity for Sydney and Australia in Fintech and
believe “the critical first step (to drive the industry) would be establishing a
Fintech hub.” Australia has and is continuing to lose significant national
income in media and retail as global technology companies increasingly
take market share from traditional domestic media companies and retailers.
However, what we have learned from media and retail is that while some
models are inherently global (Google, Facebook, Twitter, etc), others are
inherently regional and have to be developed geography by geography (e.g.
seek.com.au, realestate.com.au, carsales.com.au, etc). Financial services,
due to its significant regulation tends to be inherently regional. This
creates a great opportunity for Australia, and Sydney in particular, to build
a significant start-up eco-system around Fintech. They point to the UK and
Level39 in Canary Wharf as the model for establishing a hub in Sydney.
Part of the reason for this is that the “key to getting the best talent is raising
the profile of Fintech and creating a centre of gravity and a hub would
facilitate this by co-locating venture capital funds, and Fintech ventures
physically close to one another and within the financial services heart of the
city.”
Sydney, in their view, has all the ingredients to be a Fintech centre of
excellence including “financial services being the number one employer in
the city, two of the big four banks being headquartered here and all four
Australian major banks being in the top 20 globally.”
“
The critical first step (to drive the industry) would be establishing
a Fintech hub
”
Danny Gilligan, Co-founder, Reinventure
Source: Company Website July 2014, AFR article “Westpac innovates disruptively with SocietyOne” 10 March 2014, KPMG interview with Danny Gilligan and Simon Cant 17 July 2014, AusIndustry website for background on
ESVCLP July 2014
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
Case studies
Australasian Wealth Investments (VC fund and accelerator)
Ben and Toby Heap are brothers and the driving force behind Sydney-based,
AWI and AWI Ventures respectively. Ben is the managing director of AWI, a
listed investment company, that has a clear focus on the digital wealth segment
and targets “self-directed investors across every product suite through digital
distribution.” AWI looks to innovate and challenge the traditional advisor focus of
the industry by focussing on distribution direct to the customer. This is an area
“where traditional players struggle to innovate as the business case isn’t there”
due to large investments in advisor networks to distribute product.
AWI Ventures is another move to disrupt the financial services industry by
providing a Fintech accelerator focussed on providing early stage seed funding to
new business ventures. Toby Heap oversees AWI Ventures, has an
entrepreneurial background mainly in consumer based internet ventures and he
has personally invested in a number of start-up businesses. AWI Ventures is an
off-balance sheet business separate to the core AWI business which is itself cash
generating and profitable.
AWI Ventures borrows its model from Y Combinator in Silicon Valley who invest
early (US$20k) and run a 3 month curriculum designed to accelerate the success
of each of the start-up businesses it supports. A key learning from this for Toby is
that “what they back is the person, they look for great people with a bright idea.”
AWI ventures tries to do the same. Another thing Toby took out of his studies is
that “you could count on two hands the number of financial services companies
through it (Y Combinator), the regulatory barriers in financial services
mean…(you need) more money, more time and mentor specificity is required.”
AWI Ventures looks to provide a six month accelerator program and up to
A$100k of investment for Fintech specific start-ups. The first round call for
applications attracted 86 in total with AWI Ventures’ primary focus being on preprofitable growth stage businesses. Both Ben and Toby also noted that a single
success could make a big difference to the Fintech eco-system in Sydney
pointing to the success of Xero in New Zealand leading to another 20-30
companies also starting up in Wellington and that “New Zealand is now doing
better in early stage Fintech than Sydney or Australia more broadly.”
For both this is an important point as one big success story creates not only a
proof point to the local industry but also often leads to the creation of venture
capital, angel and super angel funding for other start-ups as successful
entrepreneurs look to invest into new ventures themselves. Ben describes this
as the “multiplier effect, we need one or two of these businesses to really fly.”
The other key ingredient for Fintech in terms of drawing in venture capital is to
have a healthy pipeline or “funnel of opportunities” for investors. For both Toby
and Ben the bigger the funnel the better as this means more competition for
funds, more potential collaboration between start-ups and industry and a
greater chance of success. When asked about how Sydney and key players in
it could best support a growing funnel of opportunities Ben was clear in pointing
out that he is “not a fan of government funding Fintech.” This is a role for the
private sector, investment managers, corporates, high net worth individuals and
entrepreneurs.
Where government and the city more broadly could play a role is in creating the
right conditions to expand the funnel. Ben and Toby see three things that
would make a real difference in this sense: “More talent in the funnel, therefore
a visa programme linked to ‘approved’ accelerator programmes to attract talent
and ensure they stay here to build their businesses and keep their visa”; “A
curriculum of speakers and events, run by a not-for-profit organisation, would
be very powerful and that could also link in the universities will be crucial to long
term success”; and “A Fintech ecosystem is crucial, therefore a shared space
with ‘subsidised’ rental arrangements for early stage growth businesses would
be very valuable.”
“
…A curriculum of speakers and events, run by a not-for-profit
organisation, would be very powerful and that could also link in
the universities will be crucial to long term success
”
Ben Heap, CEO, AWI
Source: Company Website July 2014; KPMG interview with Ben and Toby Heap 25 July 2014
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Recommendations
Unlocking the potential: the Fintech opportunity for Sydney
Recommendations for the public and private sector
What Sydney needs to do
Low
1
Implementation difficulty
3
2
6
4
5
High
Long term
Time to implement
Short term
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
Recommendations for the public and private sector
What Sydney needs to do
1
Recommended action
Considerations and ideas from stakeholder discussions
■
■
State Government to continue working with partners in the private sector
and the Committee for Sydney on the development of a comprehensive
Fintech vision and strategy for Sydney, providing a focal point for the
alignment of effort across the public and private sector and articulating a
clear commitment to the Fintech sector
Rationale
■
■
■
■
Provides an aligned vision and goals for the development of the Fintech
sector, as part of the State Government’s support for financial services
■
Articulates the importance of and commitment to Fintech as a sector
■
Establishes the critical pathway and actions for success
Responsibility
■
■
NSW Government
■
■
Commission analysis to build the business case for Sydney and
Australia in terms of detailed GDP, market size, incentives, financial
services leadership, ROI on government investment in Fintech
Need to develop an aligned vision and direction for Fintech in Sydney, as
part of broader ambitions to be a leading regional financial service centre
Asia as an export destination for Fintech and Sydney as an Asian
Fintech leader
Important to agree clear targets to measure progress, e.g. jobs growth,
new ventures started
A 3-5 year timeline with clear actions, supported by a clear commitment
to the Fintech sector is required
Alignment with the broader Financial Services Knowledge Hub strategy
Brings together participants at the industry and government level around
an agreed set of goals
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
Recommendations for the public and private sector
What Sydney needs to do
2
Recommended action
Considerations and ideas from stakeholder discussions
■
■
■
Explore the establishment of a not-for-profit Fintech hub in the heart of
the city that co-locates technology start-ups, venture capital and
established financial services firms Refer slide 71 for further details on
the Fintech hub
Rationale
■
■
■
■
Creates a critical mass and local ‘centre of gravity’ for Fintech in Sydney
Provides low cost services, e.g. working space and expertise for start
ups
Provides access to low cost capital for start-ups, as well as a pipeline of
opportunities for venture capital and established financial services firms
Drives collaboration between start-ups, established financial services
firms, as well as regulatory agencies
Responsibility
■
Industry
■
■
■
■
■
■
■
■
■
■
Subsidised rental model to make working space affordable
Critical for a hub to be located in the heart of the city close to major
financial services firms
Operate as a not for profit so as to attract multiple venture capital funds
to co-locate
Run accelerator programs of 3-6 months
Hold education sessions focussed on financial services
Hold engagement sessions involving Government representatives,
regulators and potential investors
Consider having a high growth space for businesses to graduate into
Sign friendship agreements with similar global accelerators in other
financial services centres, e.g. Level39 (UK)
Engage established financial services organisations to provide mentors
Encourage financial services firms to use the hub for incubation
initiatives, e.g. new product development
Expand reach and engagement activity across the Asia Pacific region
Establish a mechanism to allow start-ups access to regulatory
information and advice for regulatory agencies in a timely manner
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
Recommendations for the public and private sector
What Sydney needs to do
3
Recommended action
■
Government (local, state and Commonwealth) to promote Sydney as the
leading Fintech centre in the ASPAC region and establish a series of
events in the city, regionally and globally, to showcase Fintech in
Sydney, in line with our leading financial services position
Rationale
■
■
■
■
■
■
■
■
■
Establishes a platform to promote Fintech in Sydney and globally
Raises awareness for Fintech start-ups to export their capability offshore
Attracts funding and venture capital to Sydney
Attracts entrepreneurial talent to Sydney
Responsibility
■
Considerations and ideas from stakeholder discussions
Commonwealth and NSW Government
■
■
■
■
■
■
Alignment across local, State and Commonwealth Government is critical
Focus not just on the innovators but eco-system at large by engaging
and showcasing both new and established financial services
organisations and their innovations
Involve the tertiary sector and look to draw in participants from adjacent
industries such as digital and creative
Aim to have 1-2 international key note speakers per annum
Target leading financial services centres in Europe, US and Asia Pacific
to run targeted campaigns promoting Sydney and Fintech (e.g. the
Atlassian bus tour)
Promote the lifestyle of Sydney as part of the Sydney ‘value proposition’
to attract foreign entrepreneurs
Appoint a senior government representative to be the financial services
ambassador for Sydney (similar to the role played by the Mayor of
London)
Develop an annual calendar of events in Sydney
Leverage Sydney hosting the international SIBOS Conference in 2018
Participate in major global conferences, e.g. Fintechcity in London
Hold events in Asia to showcase Sydney Fintech for export and Sydney
as a destination to attract Fintech start-ups
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
Recommendations for the public and private sector
What Sydney needs to do
4
Recommended action
Considerations and ideas from stakeholder discussions
■
■
■
Form an independent Fintech focussed industry association, based in
Sydney, to give the sector a strong voice and champion
Rationale
■
■
■
Helps to prioritise the needs of the sector (liaising with Government and
regulatory agencies) and provides a representative voice for the Sydney
Fintech community
Promotes Sydney as the ‘centre of gravity’ for Fintech in Australia and
globally
Drives collaboration between financial services firms and Fintech startups
■
■
■
■
■
■
Responsibility
■
Operate on a not for profit basis
Focus on bringing together Fintech start-ups and established financial
services firms to promote collaboration and ensure alignment of activity
Aim to provide a single point of access to clients, technology, talent,
finance and international markets
Work with the tertiary sector to establish Fintech aligned curriculum
Sponsor and conduct industry based research and through leadership
Run industry based roundtables and events
Lobby regulatory bodies to achieve a balance between regulation that
maintains the sustainability of the financial services system, with new
business models and innovation that provide better customer outcomes
Connect with Innovate Finance in the UK to learn from their experience
and accelerate the development of Fintech in Sydney
Industry
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
Recommendations for the public and private sector
What Sydney needs to do
5
Recommended action
Considerations and ideas from stakeholder discussions
■
■
Work with the Federal Government and regulatory agencies, to enhance
the current regulatory, tax and business incentives available to the startup community, as well as introduce measures to target foreign
entrepreneurs, attracting them to Sydney
Rationale
■
■
■
■
Provide a regulatory and tax framework that supports innovation
Helps to broaden the entrepreneurial culture base
Attracts funding and venture capital to Sydney
Attracts entrepreneurial talent to Sydney
Responsibility
■
Commonwealth and NSW Government
■
■
■
■
■
■
■
■
Maximise amount of cash reinvested into early stage start-ups (e.g.
income tax exemption for income reinvested into the business)
Alignment of tax incentives available through various VC fund structures
and direct investment in early stage high risk ventures (current financial
incentives are not provided for direct investment by individuals or
corporations
Leverage the Centre for International Finance and Regulation (CIFR) to
research regulatory settings and the potential impact on Fintech
Review the current taxation and business incentives to determine their
“fit for purpose” nature
Review visa system to identify opportunities to attract repeat
entrepreneurs to Australia (e.g. SIV) and link to investment in Fintech
start-ups and/or participation in acceleration programs
Review other jurisdictions to examine how government and business
work together to drive Fintech (e.g. the role of UK Trade and Investment)
Examine the regulatory framework to identify opportunities to better
enable start-up businesses in financial services (e.g. regulation of new
technologies such as crypto-currencies, regulatory requirements for
start-up ventures)
Employee share option plan (ESOP) taxation arrangements to be
aligned to the year the option is exercised not the year options are
issued
Adding VC funds to the list of eligible investments for Significant Investor
Visa applicants
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
Recommendations for the public and private sector
What Sydney needs to do
6
Recommended action
Considerations and ideas from stakeholder discussions
■
■
Engage the university sector and leverage the Centre for International
Finance and Regulation (CIFR) to research key Fintech themes and
business opportunities
Rationale
■
■
■
■
■
Bring the university sector, the Fintech start-up community (including
VCs) and business together to understand the jointly explore industry
issues and opportunities within Fintech
Encourage entrepreneurialism at the university level
Explore mechanisms for industry and regulatory to make cleansed
industry data sets available to academics for experimentation
Develop ideas and business opportunities for commercialisation
Connects the university sector, the Fintech start-up community and
business
Leverage existing infrastructure, such as CIFR
Responsibility
■
Universities/CIFR and Industry
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Recommendations for the public and private sector
Unlocking the potential: the Fintech opportunity for Sydney
What Sydney needs to do – Fintech Hub
Corporate incubator
Co-working space
■
■
■
Corporate partner
innovation
Ability for
corporates to run
3-month incubators
(e.g. new product
development)
■
Early stage
start-ups
Venture Capital
Events
Growth space
■
■
■
■
200 person capacity
Breakouts
Sandboxes
■
5-10 person
ventures
20-30 person
ventures
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Research data
Unlocking the potential: the Fintech opportunity for Sydney
Research data
Comparison of government programs
London
Singapore
Tel Aviv
Government funding
Government’s focused strategy for developing the tech
start-up eco-system
Government funding
■ UK Angel CoFund – An early stage matching
fund to support the growth of angel
investment sector.
■ Start-Up Loan Scheme – Provides seed
capital and mentoring to early stage
businesses.
■ Enterprise Capital Fund Program –
Supports the creation of new early stage
venture capital funds.
■ UK Innovation Investment Fund – Co-
invests with private investors in high growth,
knowledge-based businesses.
■ Business Finance Partnership – Enables
increased access to finance by providing
matching funds.
■ Future Fifty Program – A matching program
for fifty of the most promising high-growth
companies with publicly funded schemes and
incentives relevant to their stage of growth
and specific needs.
■ Intends to develop the local tech start-up eco-system
without making it a clone of hubs
■ Allocated ~S$100 million for early-stage start-ups
within the broader S$16 billion scientific R&D budget
■ Expects the state backed start-up agenda to attract
more private investors and incubators
■ Once the local eco-system is established, intends to
scale back the level of involvement
■ Also attracting Australian start-ups (such as Sprooki)
to relocate to Singapore
Prominent government programs for tech start-ups
■ SPRING – Complete or Co-investment financing for
sector specific acceleration, commercialising ideas,
networking and assistance from multiple agencies
■ MDA i.Jam – Provides fund up to S$100,000 by
founders or incubators
■ i.Jam - Interactive Digital Media Program appointed
incubators identify, nurture, and administer competent
start-ups
■ Technology Incubation Scheme – the government
co-invests ~85%. Incubators pitch in the remaining buy
out the government's stake after three years
■ Incubator for Disruptive Enterprises and Start-ups
(IDEAS)
■ Yozma Fund [closed to new
startups]: The fund was set up to
attract foreign direct venture capital
investment into Israel. To incentivize
inward investment, foreign investors
were offered matched funding at a
rate of two to one. That is, for every
dollar a foreign investor committed
to an Israeli entrepreneur, the
government committed an additional
two. To provide further up-side
incentive, the government offered
investors the option of buying out
the government’s stake in the fund
after a period of five years
■ The Tnufa provides pre-seed
funding to of up to $50k (maximum
of 85% of costs) for early stage
activities such as financial feasibility
analysis, prototype development,
etc.
■ Chief Scientist R&D Development
Fund: This program gives new R&D
facilities access to grants covering
20-50% of a start-up’s estimated
R&D costs. In return the
Government is entitles to royalties in
the range of 3-3.5% of annual
revenues.
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
Research data
Comparison of government programs
London
Singapore
Tel Aviv
Tax structure and incentives
Tax structure and incentives
Tax breaks
■ Entrepreneurs’ Relief Program – Offers a
reduction in capital gains tax rate of 10% for
founders of start-up firms who sell or give
away their businesses.
■ Enterprise Investment Scheme (EIS)/Seed
Enterprise Investment Scheme (SEIS) –
Encourages investment into early stage, highrisk businesses and provides an upfront
income tax relief of 30 percent and 50
percent, respectively. The scheme also
provides capital gains tax exemption and is
valid until the end of 2014.
Visa policy & immigration
■ Entrepreneur Visa Scheme – Introduced in
2008 to attract entrepreneurs from across the
world to establish their business in the UK
■ Global Entrepreneur Programme – Run by the
UKTI to attract high caliber, early stage
companies and entrepreneurs to set up in the
UK . Under the program, participants are
offered bespoke advice and capital raising
assistance from a team of experienced
entrepreneurs.
■ Tax exemption for start-ups – Full tax
exemption on a specified part of a start-up’s
taxable income for the first three consecutive
years
■ Pioneer incentive scheme - Businesses that
raise overall industry standards eligible for full
corporate tax exemption on qualifying profits
for up to 15 years
■ Productivity and innovation credit scheme
- ~400 percent deduction or allowances on
~$400,000 expenditure incurred in qualifying
innovative activities
■ Lower income and corporate tax rates
■ Low GST rates (7%) - below global (16.4
percent) and ASPAC (10.6%) averages
Visa regime
■ Open Immigration policy facilitates the
relocation of foreign entrepreneurs
■ Singapore has a relaxed immigration policy,
making it easier to gain Singapore Permanent
Residence (PR) status
■ Tax breaks are given to venture capital
backed accelerators who set up in the city.
The Angel’s Act. (2011) provides tax
incentives to angel investors who invest in
seed companies.
■ Recently, in July 2014, the ministries
proposed simpler criteria for tax incentives to
encourage seed-stage investments (Angels
Act 2). Under the new plan (which would
come into effect in 2015), to claim the tax
benefits, one will have to invest in start-ups
that are less than three years old, earn no
more than 1.5 million Shekels (~US$0.44
million) in annual revenue, and incur
expenses up to 3 million Shekels (US$0.88
million).
Visa policy
■ The government is reviewing its visa policy
with the aim of introducing a “start-up visa”
regime that would make it easier for skilled
foreigners to come and work in Israel.
■ EntrePass, the visa for foreign entrepreneurs
is considered to be more flexible than other
countries such as the UK and the US
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
Research data
Comparison of government programs
Singapore
Tel Aviv
Government backed co-working spaces
Shared/co-working spaces
■ The Infocomm Development Authority of
Singapore (IDA)’s IDA Labs serve as coworking spaces for the community, industry
and government agencies
■ The labs provide physical lab spaces for
generating new ideas, developing new
technologies and testing out proof of concepts
■ The IDA labs also partner with global IT
vendors such as Intel, HP and Redhat for
providing R&D resources, enabling
technologies and best practices from other
geographic markets such as the US
■ The city government has converted a number
of municipal facilities such as city libraries into
incubator start-up spaces.
■ The Library: The Library in the historic Shalom
Tower provides a shared working space and
hub facilities for teams dedicated to
developing internet start-ups and new
technology companies. Teams of start-ups
apply to be based at The Library for a period
of about four months. In return, start-ups
teams pay a subsidized rate of US$70 per
month for the facilities.
■ In addition, IDA acts an accelerator –
expediting the process of commercializing
innovation ideas
■ IDA’s accreditation program to help local
start-ups position themselves as qualified
vendors to potential government and large
enterprise buyers
■ This helps start-ups to generate revenue from
the early stages and reduce dependency on
VC funding
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
Research data
Comparison of government programs
London
Singapore
Tel Aviv
Other initiatives
Incentive to banks and financial services
institutions for innovation
Sponsor events to cultivate the start-up
industry
■ The Financial Conduct Authority (FCA) of UK
launched ‘Project Innovate’ – aimed to
ensure that UK financial technology
companies are supported by the country’s
regulatory environment.
■ In 2013, The London Stock Exchange
introduced changes to IPO regulations by
allowing high-growth companies to make
initial public offerings with just 10 percent of
their stock, compared to a standard
requirement of 25%. This move was primarily
to enable higher rates of technology company
listings in the UK.
■ Established institutions such as the
Technology Strategy Board as UK's
foremost innovation agency, to oversee
innovation programs and accelerate economic
growth
■ The SPRING program encourages
innovation in the country’s key sectors
such as banking, along side incubating startups
■ It has accredited local banks such as the
OCBC and Maybank with the Singapore
Innovation Class (I-Class) certification
■ I-Class is national recognition for
organisations that have management
systems, underlying technologies and
processes in place to achieve excellence
through innovation
■ Government programs such as these provide
■ FIN-TECH, Tel- Aviv 2014: It is the 1st
International Conference on Financial
Technology convened by The Israel Export &
International Cooperation Institute and
Ministry of Economy. The event is planned to
be held in September 16-18, 2014, in Tel
Aviv.
■ Go 4 Israel: the 12th edition of “go 4 Europe”
conference (http://www.go4eu.com/)
■ MIXiii: “Mix Israel Innovation International” –
Israel innovation conference
(http://www.mixiii.com/)
a fillip for Fintech innovation in the country
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Sydney
Unlocking the potential: the Fintech opportunity for Sydney
Sydney
Government support (1/2)
The Australian government offers funding at both the Commonwealth and state levels to encourage the setting up of start-ups in the country
1
Extent of
Government
support
Government funding
■ Venture Australia - Announced in February 2013, the scheme offers high- risk capital to Australian
■
■
“
businesses with high growth potential, from start-up to growth. The package will provide A$378 million
over 15 years.
Innovate Australia – Connecting technology SMEs and businesses in key sectors of the NSW economy
to develop globally competitive business-to-business (B2B) solutions that address compelling needs.
There are three funding elements to Innovate NSW including Minimum Viable Product (MVP),
TechVouchers (TV), and Collaborative Solutions (CS).
The Entrepreneurs’ Infrastructure Programme – Commenced in July 2014, the scheme offers Australian
businesses with value-added advice and support such as business evaluations, ideas for
commercializing, in addition to business growth grants
We want the world to know NSW as the
place where great ideas are born – ideas
that support economic growth and position
Sydney and NSW as a global leader in
NSW. Innovate NSW will support
collaborative projects with the potential to
leverage significant investment and unlock
sustained economic growth for the State.
”
Andrew Stoner, NSW Deputy Premier
and Minister for Trade and Investment
Source: “The Entrepreneurs Infrastructure Programme”, Australian government website, “Venture Australia”, Australian government- Department of Industry ; Innovate NSW press release 13 December 2012; Industry
reporting; KPMG analysis
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
Sydney
Government support (2/2)
Encourages investments in start-up enterprises via some incentives and tax exemptions, in addition to attracting skilled migrants
1
Extent of
Government
support
Tax structure and incentives
■ R&D Tax Incentive: Offers a refundable tax offset of 45 percent for smaller companies investing in
■
■
innovation including some software development.
Innovation Investment Fund co-investment scheme: Government matches funds with private sector fund
managers (generally VCs) for investment in early stage companies . As on April 2013, a total of A$644
million in capital has been committed.
Early Stage Venture Capital Limited Partnerships (ESVCLPs) - Encourages Australian and foreign
residents to invest in early stage venture capital activities/ start-up enterprises by providing them with tax
exemptions on their share of income and capital gains from these investments, including from their sale.
Visa policy & immigration
■ Significant Investor Visa (SIV) Program – The SIV program is a special subclass of business migration
■
■
visa available to high net worth individuals willing to invest A$5 million into Australia. Under this scheme,
permanent residency restrictions are also relaxed- from two years to 160 days spread over a four year
period
Business Innovation and Investment Visa – Available for participants interested in either investing in
Australia or owning and managing a new or existing business. Requires nomination of the state/territory
government.
Skilled Nominated Migration Program – Run by the NSW government to attract skilled professionals
across occupations to develop a rich talent pool for the state’s talent needs.
Source: “Visas and Migrations” – NSW Trade & Investment website; “The start-up economy - How to support tech start-ups and accelerate Australian innovation“, Google Ventures & PwC (April 2013),
“Early stage venture capital limited partnerships (ESVCLPs)”; NABprivate wealth website accessed July 2014; Industry reporting; KPMG analysis
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
Sydney
Access to Funding
Although still in its infancy, activity in Sydney’s venture capital market is picking up with the entry of big names such
as Westpac and Telstra
2
Access to
Funding
■
■
■
■
■
Reinventure Group – Launched by Westpac (Feb 2014), the fund seeks to back early stage technology start-ups with a
A$50 million in venture capital
– The funds’ current focus seems to be on data aggregation and payment system start-ups. Recently invested in
SocietyOne – a Fintech provider in the peer-to-peer lending space
Telstra has a A$50 million fund to encourage new technology start-ups (less than two years) Australia.
– Telstra’s incubator muru-D will aid 10 start-ups with A$40,000 in exchange for a 6% stake in the business along with
subsidized or free rent and mentoring and coaching services and technology support.
Optus – Innov8 Seed Program – Offers seed funding up to A$250,000 for entrepreneurs in Australia associated with
tech-start-ups
– The seed program recently relaxed its rigid bi-yearly terms to encourage more applications round the year, resulting
in more investments in Australia’s growing tech-start-up ecosystem
In March 2013, Blackbird Ventures announced A$20 million in funding with the aim of supporting 25 start-up companies
in the mobile, software and digital sectors
Of late, Australia is also witnessing a trend wherein individual investors are returning back home to fund potential
entrepreneurs and build a thriving start-up ecosystem
– Cases include those of technology investor Bardia Housman and some of the wealthiest families such as the
Smorgons, Libermans, Packers, Whites and Kahlbetzers
However in 2013, industry group AVCAL, reported a drop in PE and VC investment activity in Australia to A$2,760 million, an 8%
decrease from FY2012
Source: “Westpac aims to get ‘disruptive’ with launch of $50 million venture capital fund” –start-up Smart; “Telstra plans to incubate start-ups for $40,000 a pop” – Financial Review; “$30 million technology fund open for business”; “Optus frees up
Innov8 seed funding application time frames”– Financial Review; ‘Bardia Housman’ ; “Schooled by success: The start-ups Rich-listers are investing in” – Financial Review, accessed July 2014; Industry reporting; KPMG analysis
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
Sydney
Access to skill and talent
Sydney enjoys access to a talented workforce owing to NSW’s strong skill pool in the areas of finance & insurance
3
Skill and Talent
Availability of talented and skilled workforce
■
■
■
Most global banks have their Australian headquarters in Sydney.
Financial services and insurance among the leading employment sectors in the state – 180,000 skilled
professionals as of August 2013. Per the government’s recent Skill Shortages, Australia report, the
country faces no shortage of accounting and ICT professionals for the next 5 years.
Among the working age population, 55 percent hold tertiary qualifications.
Skill Development Initiatives
■
“
I’m really excited about creating a
national network of students and
entrepreneurs on campus. That’s
where the potential is: to encourage
more start-ups to launch from
campus. There is a big gap there at
the moment, with too many students
leaving universities without being
clued up on the start-up scene and
how to get going.
In 2013, Google partnered with the University of Sydney to extend its entrepreneurial accelerator
program INCUBATE to other universities across the country. Start-ups in the program receive a
A$5,000 grant, access to co-working space and mentoring.
Education and Curriculum
■
■
The Australian government is also in the process of reworking its national curriculum to require children
to learn programming concepts beginning in kindergarten and how to write computer code beginning in
year 3.
Sydney is home to top global universities in finance and accounting and technology per QS World
University Rankings for 2013 – include University of News South Wales, University of Technology
Sydney and University of Sydney.
”
James Alexander, INCUBATE program
manager , University of Sydney
Source: “New South Wales Trade & Investment website”; “QS World University Rankings 2013 – Finance & Accounting”; “Skill Shortages, Australia 2013”; “Computer Science Reforms”; Google partners with Sydney
University accessed July 2014; Industry reporting; KPMG analysis
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
Sydney
Business environment (1/2)
Ease of doing business coupled by NSWs strong local economy is an attractive proposition for businesses
4
Business
environment
■
■
■
■
“
Entrepreneurialism needs to
be done in a tribe and being
in the Hub puts us physically
closer to where more
entrepreneurs are.
”
Phil Morle,
Co-founder, Pollenizer
■
Ease of Doing Business - Per World Bank, Australia ranks among the top ten countries globally for
starting a business – taking just two days and two procedures to register a private limited liability
company.
– Per its latest Entrepreneurship Data – Australia has a high density of businesses being set up in
the last decade (2004-2012) with a score of 12.16 and 185,009 new limited liability companies.
Strong local economy – New South Wales has been credit rated AAA by both Standard & Poor's and
Moody’s, reflecting the local economy's strength in withstanding changing economic circumstances.
Encourages a Collaborative Environment – The NSW Government recently established the Centre for
International Finance and Regulation (CIFR) in Sydney to assist research and education in the
financial sector by fostering collaboration among Australian universities, Government, regulators and
industry.
Favorable Tax System – Businesses are taxed with a company income tax rate of 30 per cent with no
restrictions on capital flow, profit remittances, capital repatriation, transfers or royalties and traderelated payments.
Competitive Business Costs - Affordable real estate prices when compared to other financial peers in
the region such as Seoul, Tokyo, Hong Kong and even global peers such as London, Paris and
Singapore.
Pollenizer, a start-up incubator, recently partnered with Hub – a provider of co-working spaces in Sydney to
offer its “start-up science” curriculum to Hub’s 1000-plus paying members
Source: “Doing Business 2014- Australia” and “Entrepreneurship Data”– The World Bank ; “New South Wales Trade & Investment website”; “Pollenizer to move in with Hub Sydney, create tribe of 5000 entrepreneurs” –
Financial Review; “Sydney Australia website” – NSW Government, accessed July 2014; Industry reporting; KPMG analysis
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
Sydney
Business environment (2/2)
There is a growing interest among stakeholders in developing Sydney into a Fintech hub for the region
4
Business
environment
Of late, Sydney is witnessing a steady surge in activities specific to the
Fintech sector
■
■
■
“
Australia has a very well-proven,
reliable and large-scale financial
services industry and if there was one
area in which we could build a real
level of expertise in global terms, it is
financial services. We would love to
see Australia become known for its
Fintech sector
Yodlee Interactive partnered with BlueChilli, a Sydney based incubator for tech-based start-ups to
accelerate Fintech innovation in the city by extending the access of its cross-platform Application
Program Interface (API) to BlueChilli members.
Launched in March 2014, the AWI Ventures Accelerator Program is focused on Fintech and offers
A$100,000 for technology start-ups in the direct-to-consumer wealth management services along with
bespoke services such as expert mentoring and series A funding support.
Venturetec accelerator programme – A 12-month-long for enterprise technology start-ups in Sydney
by the StartmeupHK Venture Forum.
Barangaroo South, a A$6 billion re-development initiative of the New South Wales Government aims to
position Sydney as a global financial hub, alongside London’s Canary Wharf, Singapore's Marina Bay
and Shanghai’s International Commerce Centre
”
Ben Heap,
Chief Executive, AWI Ventures
Source: “Yodlee Interactive Partners with BlueChilli” – BlueChilli website; “ AWI Ventures Accelerator Program” – Finisia; “Venturetec Accelerator Program” – start-up Daily accessed July 2014, “Barangaroo” - Investordaily
Industry reporting, KPMG analysis
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
Sydney
Gaps and Challenges (1/2)
■
■
Government
Support
■
■
Access to
Funding
Source: KPMG analysis
■
Government Funding Cuts - Plans to scrap eight programs from January
2015 that provided funding to tech start-ups per the recent budget
Government schemes do not differentiate start ups and SMEs - The new
Entrepreneurs' Infrastructure Programme, to which tech start-up grant
applicants are now being directed for support, is focused on SMEs rather
than start-ups.
Tax Regime is anti-start-up - Australia’s current regime taxes start-ups on
equity invested even before it makes money. Other unfavorable
regulations include the tax treatment of employee share options.
Availability of Limited VC Funding – Easier to source seed funding in
Australia but limited access to growth capital and advanced funding
rounds
Absence of theme based funds – Unlike the US or UK, Australia only has
a handful of Fintech focused VC funds
“
Australia invests a fraction of what other
developed countries do funding tech start-ups,
and the budget has provided no solid proof that
the government intends to rectify this.
”
Steven Baxter, the managing director
of start-up accelerator River City Labs
“
As a business start-up, taxes are high and I wish
the brackets were smaller.
“
Early-stage start-ups instead have to rely on the
3 F’s—friends, family and fools. That’s the only
funding you get.
”
Annette Coleman, Entrepreneur
”
Steven Baxter, the managing director
of start-up accelerator River City Labs
“
It is hard for a Fintech internet business to get a
strong foothold because investors are not sure
whether they can trust these people with their
money.
”
Ben Heap, Chief Executive, AWI
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
Sydney
Gaps and Challenges (2/2)
■
Skill &
Talent
■
■
Business
Environment
■
Cultural Shift Towards Entrepreneurship – Although, a vast
majority of Australians are pro-entrepreneurship and are
interested in giving it a go, seasoned entrepreneurs with
global experience were of the view that chances of their
success at the global stage could be enhanced if they
increased their appetite for risk and were open to sharing
ideas.
Skill Development – From a Fintech perspective, Australia’s
education system needs to improve when it comes to honing
condusive skill sets. For example, by implementing the recent
curriculum rework – which requires children to develop
programming concepts is at the prerogative of State
Governments and not compulsory
Limited start-up Activity – especially in the financial services
and banking domain, owing to a complex regulatory structure.
The Need for Collaboration – Australia lags when it comes to
incubation and accelerator programs focused on Fintech.
Also, there are limited instances of collaboration between
stakeholders in the sector.
“
The risk culture here [in Silicon Valley] is very different to
Australia’s. Australians are definitely not as risk-taking. One
of the things I have noticed about Australian entrepreneurs
is that they don’t really share their idea. They think
someone will steal it.
”
Bardia Housman, Australian tech investor
“
“
Failure is treated very harshly here and it stifles innovation
and risk-taking,
”
Adrian Turner, co-founder, Mocan
Banks in Australia, South Korea, and Singapore are doing a
lot more innovation than you see in US banks. The
dichotomy is that the most innovative banks are in this time
zone, but not the most innovative start-ups.
”
Neal Cross, chief innovation officer at DBS
“
If our leaders don't bring Australia in line with the rest of the
world when it comes to fostering tech start-ups, we will
continue to see many of our most successful start-ups have
no choice but to move overseas.
”
Peter Bradd, board member, start-upAUS
Source: KPMG analysis
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Global Fintech Leaders
Unlocking the potential: the Fintech opportunity for Sydney
Global leaders
Comparison of global Fintech leaders (1/4)
Fintech
hubs
AMS
Silicon
Valley
Fintech
hubs
New
York
Overall message
Despite lacking a
vibrant FS sector,
Silicon Valley
dominates
Fintech
investments
globally. NonAmericans facing
stringent visa
requirements is
seen as the only
challenge for the
sector
Overall message
Government
support
§ The US government was
instrumental in creating
conditions that led to the
formation of the Silicon
Valley
§ Because the valley has
become a vibrant economy
in itself, with a healthy mix
of skill, VC’s and start-ups,
there is limited need for
government intervention
and support
Government
support
New York is the
§ Strong funding support at
second strongest
the center (‘Start-up
Fintech cluster in
America’), city (New York
the world. Relative
City Entrepreneurial Fund)
to the Silicon
and at the university level
Valley, its low
(Start-Up NY)
Fintech profile
§ Stringent visa procedures
affects ability to
impede non-American
attract large capital,
entrepreneurs
but the city is
reported to being
the next most likely
to attain the status
of an established
and leading Fintech
hub
Private VC
funding
§ Silicon Valley retains the
highest access to start-up
funds in the world
§ In 2013, nearly 1 of every 3
Fintech dollars went to Silicon
Valley-based companies
§ In the first quarter of 2014, the
region saw US$376 million in
total Fintech investment
§ Fund availability across seed
Skills/
Talent
§ Entrepreneurial courses
and strong university
support for start-ups
§ Tech hub resulting in
significant talent pool
§ Since 1930, Stanford
alumni and faculty have
created nearly 40,000
companies and 5.4 million
jobs
Business
environment
§ Highest concentration of
high-tech workers
§ A combination of both
Fintech accelerators
such as fin-tech.org and
other tech accelerators are
assisting Fintech start-ups
in the valley
§ Lack of proximity to
financial services firms
and growth stages
Private VC
funding
§ NYC ranks No. 2 in the US
(total VC invested in technology
start-ups)
§ 5 year CAGR for Fintech related
deals grew by 31 percent
annually, compared to Silicon
Valley’s 13 percent
§ Absolute number of deals
increasing, however, average
value of deal in NYC lower
than the Silicon Valley
§ Seed stage funding available,
growth stage a challenge
Skills/
Talent
§ Established and
successful applied
sciences and engineering
programs – Applied
Sciences NYC (initiative to
grow the economy by
developing technology
related skills)
§ Engineering talent
gravitating to the city:
Google, Facebook,
Twitter, Amazon and
eBay growing New York
offices
Business
Environment
§ In terms of absolute size,
NYC’s Fintech cluster is
second only to Silicon
Valley
§ Concentration of Financial
institutions, tech startups and accelerators
§ Worldwide Investor
Network: An accelerator
program that aims to
discover companies from
around the globe and bring
them to NYC
Source: KPMG analysis
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
Global leaders
Comparison of global Fintech leaders (2/4)
Fintech
hubs
EMEA
London
Fintech
hubs
Dublin
Overall message
With its booming tech
and FS sectors, London
is next most lucrative
Fintech destination after
the Silicon Valley and
New York. VC fund
limitations to the ‘seed
phase’ and relatively
smaller investments are
seen as roadblocks to
growth
Overall message
Tax incentives, access
to talent, and an
engaging pro-business
environment puts Dublin
on the Fintech map.
What may prove costly
to the city’s Fintech
growth story is its close
integration with
London’s Fintech
cluster
Government
support
§ The UK government – via
the UK Trade & Investment
(UKTI) - The Financial
Services Organization
(FSO), and Her Majesty’s
Treasury is aims Fintech
in London
§ Schemes such as the
Entrepreneurs’ Relief
Program are available as
a apart of Tax incentives
Government
support
§ Enterprise Ireland among
offers government support
and funding for fledgling
start-ups in Dublin– plans
to support ~70 start-ups
each year
§ Access to Overseas
Capital – government is
encouraging global
investors and operates a
range of schemes for startups
Private VC
funding
§ Steep rise in Fintech deals
– 84 deals took in the UK
between 2003-13 and $675
million in investments
§ 5-year CAGR for Fintech
was twice the global and
Silicon Valley average in
2013
Skills/
Talent
§ Estimated 44,000 Fintech
workers within 25 miles
of London, compared with
43,000 for New York\
§ More than 24,000 tech
firms in London,
supporting some 48,000
jobs
§ However, lack of funding,
§ Seed funds, VCs, and
local business angels over €800 million in
funding available
§ Innovation Fund Ireland -
Allows international
venture capital funds to
establish European
headquarters in Ireland
§ Limited to seed level
investments which are
fraction of investments in
the US
§ Hosts three Fintech-
specific accelerator
programs
§ Four of the world’s ten
biggest banks with global
or European headquarters
situated in London
§ Proximity to London’s
financial hub and
reasonably successful
accelerator initiatives lead
to a favorable business
environment
during the later stages, is
impeding the Fintech
sector progress
Private VC
funding
Business
environment
Skills/
Talent
§ Joint government/
industry efforts to
promote technology
courses
§ Over 500 financial
services firms employing
32,700 professionals;
technology sector employs
1,05,000 professionals
Business
Environment
§ NDRC Fintech, Ireland’s
first financial technology
start-up program launched
in May 2014
§ NDRC LaunchPad and
Dublin City University’s
Ryan Academy for
Entrepreneurship’s Propell
er Venture Accelerator
Fund
§ However, proximity to
London is also challenge as
Irish firms are keen to
relocate
Source: KPMG analysis
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
Global leaders
Comparison of global Fintech leaders (3/4)
Fintech
hubs
EMEA
Berlin
Fintech
hubs
Tel Aviv
Overall message
Berlin is
operationally viable
when compared to
other European
cities. However, the
lack of government
funding, incubation
programs,
entrepreneur
education and
private funding are
inhibiting its growth
as a Fintech hub
Overall message
Tel Aviv is the tech
and financial hub of
the region and global
financial institutions
are opting to move to
Israel. Though startups flourish in Tel
Aviv, they often also
get absorbed by
global players or
choose to be listed
on foreign stock
exchanges
Government
support
§ Government programs such
as Technologiestiftung
Berlin (TSB) and
Investitionsbank Berlin
(IBB) exist to provide
incubation to tech start-ups
§ However, limited
government-driven activity
related to ‘entrepreneurship’
initiatives
§ Red tape and bureaucracy
also inhibiting growth
Government
support
§ Government supports
entrepreneurs and start-ups
through:
§ Investments such as Tnufa
and Chief Scientist R&D
Development Fund
§ Funding co-working spaces
– The Library
§ Events focused on start-ups
– Fintech, Tel- Aviv 2014
§ Tax breaks to venture
capital backed accelerators
Private VC
funding
§ Germany’s share in the
global Fintech M&A and
investment space less than
0.6% (2012)
§ Some private sector funds
Skills/
Talent
§ Largest university
centre in Germanspeaking countries
§ Significantly low cost of
education for students
(Point 9 Capital) and
§ Lack of dedicated
incubation programs
courses for driving
(DACH, Smartbootcamps)
entrepreneurial culture
have emerged – success is
limited
§ Interest among international
§ ~ 70 active venture
capital funds in Israel, of
which 14 international VCs
§ An additional 220
international funds active
in Israel
§ More funding for early
stage start-ups as
compared to matured ones
§ Growing network of small tech
ventures, incubators and
accelerators
§ Growing job market - a new
start-up founded every 20
minutes and the industry set to
produce 100,000 new jobs by
2020
§ Lower operational costs –
Lower rent, overheads, etc.
§ Entrepreneurs without FS/ICT
investors is growing,
however this is yet to lead
to strong outcomes
Private VC
funding
Business
environment
experience are trying to tap
Fintech opportunities
Skills/
Talent
§ Strong tech base due
to mandatory 'tech
intensive' military
service
§ Dedicated research
courses in Israeli
Universities
§ Nine out of every 1,000
workers engaged in
research, nearly 2X the
rate of the US and
Japan)
Business
Environment
§ Geopolitical risk: War and
Israel’s geographic location
pose a significant risk to
businesses
§ Strong network of small tech
ventures, incubators and
accelerators (Leumi bank and
Elevator)
§ Major banks setting up
innovation labs and R&D
facilities - Citigroup’s
accelerator program and
Barclay’s in-house R&D center
is in Tel Aviv
Source: KPMG analysis
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
Global leaders
Comparison of global Fintech leaders (4/4)
Fintech
hubs
Singapore
Overall message
Extensive govt. support
and conducive
environment is
attracting VC funding
and foreign ventures in
tech start-ups. Although
the state lacks explicit
Fintech focus, FS and
tech companies are
investing in the sector
Government
support
§ US$80 billion budget for
tech start-ups
§ Incentivizing private
investment and foreign
ventures
§ Supportive tax and visa
regime
§ Funding co-working spaces
– IDA Labs
§ No particular focus on
ASPAC
Fintech
Fintech
hubs
Hong
Kong
Overall message
Hong Kong’s
government’s Fintech hub
agenda is backed by
growing levels of VC
funding, rolling out of
entrepreneurial
universities and a
supportive business
environment.
The market however, is
still small and in its growth
stage
Government
support
§ State backed InvestHK,
Cyberport and ITC offering
co-work spaces, incubation
and acceleration
§ Incentivizing foreign start-
ups to relocate to Hong
Kong
§ Collaborating with Israel
for Fintech opportunities
§ Complex tax and visa
regime compared to
Singapore
Private VC
funding
§ US$1.4 billion funding
(2013) – ahead of Hong
Kong, Japan and Korea
Skills/
Talent
§ Ready talent pool – 5.5
percent population in FS;
146,000 tech workers
§ Mature start-ups attracting § ~74 start-ups incubated by
more funding
§ Banks funding tech
innovation
§ Lack of repeat funding
SMU and NFIE
§ Funding via both home
grown and foreign VCs,
and crowdfunding
platforms
§ However, the market is
still small, particularly for
seed funding
business culture
§ Ranked #1 (World Bank)
for ease of doing business
§ 63% mobile banking
penetration
system lacks entrepreneurial § 3 of ASPAC’s largest
inclination
banks HQ in Singapore
§ Innovation labs by
Citigroup and Accenture
are driving Fintech
Skills/
Talent
§ Growing VC and PE capital. § Large number of dedicated
Average funding in H1 2014
(~US$6 million) exceeding
full year 2013
§ Migrant population driving
§ Secondary education
due to premium price
claimed; ventures less
receptive to PE sales
Private VC
funding
Business
environment
courses on
entrepreneurship across
Hong Kong and Mainland
China
§ Emerging career
development platforms
offering hiring solutions to
tech ventures
§ However, not many
specialized Fintech
courses though
Business
Environment
§ Native entrepreneurial
culture
§ Ranked #2 (World Bank)
for ease of doing business
§ Full 4G and fibre
broadband coverage
§ 70 of the top 100 global
banks present in Hong
Kong
§ Global IT vendors
(Accenture, Google) driving
Fintech
§ Market continues to be
small
Source: KPMG analysis
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Silicon Valley
Unlocking the potential: the Fintech opportunity for Sydney
Silicon Valley
Introduction
Despite lacking a vibrant FS sector, Silicon Valley dominates Fintech investments globally. Non-Americans facing stringent visa requirements is
seen as the only challenge for the sector
Macro parameters
■
■
■
■
■
#4 in ease of doing business (Doing
Business report, 2014)
#2 among G-20 nations on the etrade readiness index (EIU report,
2014)
#12 globally on the 2014 Economic
Freedom Index
US$ 17 trillion GDP in Q1 2014
2.1 percent inflation (CPI) in May
2014
State of the Fintech sector
■
■
■
San Francisco
Silicon Valley’s start-up
ecosystem spans
across San Francisco,
Redwood City, Palo
Alto, and Mountain View
San Francisco attracts
the highest VC in the
Silicon Valley region
Redwood City
Portero Hill and Rincon
Hill , large swathes of
San Francisco's
waterfront, running
south from the central
financial district have
been strong tech hubs
since the dot-com boom
Mountain View
Palo Alto
~20 Fintech deals in 2014; CAGR
growth of 13 percent between 2009-14
$376 million in total Fintech investment
for Q1 2014
11,000 Fintech professionals in the San
Francisco – Silicon Valley
Source: Doing Business 2014 – The World Bank; “The G-20 E-trade Readiness Index” - article by ZDNet;’ “2014 Index of Economic Freedom” – The Heritage Group; “GDP of the United States of America” – Bureau of
Economic Analysis; “Why San Francisco May Be the New Silicon Valley” – City Lab
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
Silicon Valley
Government support (1/2)
While the government in the US has multiple schemes to support start-ups, the expansive private funding options in the Silicon Valley drastically
overshadow any government funding initiatives
1
Extent of
Government
support
Government funding
■
■
“
Right now in one of those
classrooms there are students
wresting with how to turn their big
idea -- their Intel or Instagram -- into
a big business. We're giving them
all the skills they need to figure that
out, but then we're going to turn
around and tell them to start that
business and create those jobs in
India or China or Mexico or
someplace else. That's not how you
grow new industries in America.
That's how you give new industries
to our competitors.
”
Barack Obama,
President, United States of America
■
■
Today, Government funding in the Silicon Valley to support start-ups is not comparable to the volume and value of
deals supported by privately managed funds. However, it is important to analyse the government’s role is setting up
its most important start-up yet: the Silicon Valley itself
In the 1930s, the venture capitalist was the US military (which was investing in R&D), and the role of the tech startup was played by America’s engineering schools in the region
By the mid 1960s, three-quarters of all the graduate thesis in the engineering department at Stanford were
classified. The institution used state funds to fuel research and ultimately business ventures that created the Silicon
Valley
This government funding played a key role in developing experts in applied sciences, who would go on to create
semi-conductors, capacitive sensors, solid state memory, cellular communications, and protocols such as TCP/IP.
These elements form the core of what is today an icon of American corporate innovation – the iPhone
So while private capital is focused on creating the next Facebook, government funding can focused on higher goals,
such as – driving a country’s competitiveness, increasing its people’s standard of living, or perhaps, creating the
next Silicon Valley
Visa policy & immigration
■
■
In June 2013, the Senate proposed Start-up Visa (or EB6). Venture capital investment firms and entrepreneurs from
abroad are currently disappointed as this is not been enacted yet
However, the US already has viable visa solutions to encourage start-ups. And although not perfect, these visas
have long been available and used successfully. Examples are – O-1 and EB1A Extraordinary Ability Visas, E-2 and
EB5 Investor Visas, H-1B and EB2 or EB3 Professional Visas, L-1A and EB1C Multinational Manager/Executive
Visas etc.
Source: SSBCI – US Treasury website, Whitehouse - Startup America Factsheet – Official website of The White House, US Visas - Coming to America – The Startup Visa – Forbes; KPMG analysis
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
Silicon Valley
Government support (2/2)
The Silicon Valley’s healthy mix of skill, private funding and start-ups has made the location a vibrant economy in itself. One which requires
minimal government support. In fact, most business view government intervention as an inhibitor to innovation
1
Extent of
Government
support
Tax structure and incentives
■ American Taxpayer Relief Act (ATRA) – At the central level, the Act helps small businesses by providing
tax breaks which include items such as bonus depreciation, deduction on certain acquisitions, R&D tax
credit, 100 percent tax-free capital gains on sale of small-business stock etc.
Other initiatives
■ Small Business Development Centers (SBDCs) provide a vast array of technical assistance to small
businesses and aspiring entrepreneurs
■
SCORE, supported by the U.S. Small Business Administration (SBA), is a non-profit association
dedicated to helping small businesses across the US grow and achieve their goals
GAPS & CHALLENGES
■
Stringent visa/immigration procedures: Proposed ‘start-up Visa’ act has not been enacted yet. And while
non-American entrepreneurs do get visas, the process is described to be complex and “something to
worry about”
Source: SBA.gov – SBA.GOV website, SCORE – Official website, StartUpNY – Startup.NY.GOV website, The Startup Visa – Forbes, US Visas - Coming to America KPMG analysis
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
Silicon Valley
Access to funding
Despite lacking a vibrant FS sector, Silicon Valley dominates in technology investments globally.
2
Access to Funding
Tax structure and incentives
■ The region has consistently taken over 40 percent of VC deals and over 50 percent of funding to tech
start-ups across seven major US venture hubs including New York and Massachusetts
■
■
VC financing trends in Silicon Valley (tech)
2,847
3,000
2,500
2,120
2,000
1,727
1,513
1,500
1,000
1,020
1,386 163
1,266 152
1,157 1371,247 1361,060
144
133
1,875
199
2,260
300
1,935
184
218
1,610
1781,529 180
162
267
251
2,005 226
2181,831 208
150
100
513
500
250
200
107
50
45
0
Investment dollars
Q3 13
Q2 13
Q1 13
Q4 12
Q2 12
Q1 12
Q4 11
Q3 11
Q2 11
Q1 11
Q4 11
Q3 10
Q2 10
Q1 10
Q4 09
Q3 09
0
Q2 09
Silicon Valley lacks the close
coexistence of Fintech start-ups
and their customers, i.e., financial
service institutions. However, the
start-up environment is so positive
that this does not seem to act as a
deterrent for the sector in the
region
2,602
Q1 09
■
Other than VC funds, several large banks have also set up Fintech venture funds based in the Silicon
Valley. An example is BBVA
Q3 12
GAPS & CHALLENGES
Silicon Valley dominates Fintech investments globally; in 2013, nearly 1 of every 3 Fintech dollars and 1
of every 5 deals went to Silicon Valley-based companies. In the first quarter of 2014, the region saw
US$376 million in total Fintech investment
No. of deals
Source: CB Insights – Venture Capital: Silicon Valley – CB Insights; KPMG analysis
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
Silicon Valley
Access to skill and talent
A strong network of pro-entrepreneur Universities along with ready availability of talent drives the skill base in Silicon Valley
3
Skill and talent
Proximity and availability of skilled workforce
■ In Silicon Valley and the adjacent Bay Area, 45 percent people are undergraduate compared with 28
percent for whole of the US
■
■
GAPS & CHALLENGES
■ Job growth slowing. The
unemployment rate in the San Jose
metro area levelled off at 6.3
percent in 1Q 2014. Most jobs
were concentrated in lower-paying
service occupations, rather than
the professional services
More than 60 percent of the college graduates working in science and engineering fields in Silicon Valley
were born outside the US
Culture of recruiting school students as interns. Helps in developing future workforce with an
entrepreneurial focus
Strong network of academic institutions
■ Close ties with the top tier educational institutions in the US such as the Stanford, MIT and Yale
■ The alumni and faculty of Stanford University alone have created nearly 40,000 companies and 5.4 million
jobs since the 1930s, which collectively generate annual revenues of US$2.7 trillion
■
■
While Stanford has a dedicated entrepreneurial culture, others such as Harvey Mudd focus on specialized
skills
Harvey Mudd produces a huge amount of science and engineering PhDs, and the school has a reputation
for turning out graduates who excel in the humanities as well as math and science, a uniquely broad
skillset required in Fintech start-ups
Source: SBA.gov – SBA.GOV website, SCORE – Official website, StartUpNY – Startup.NY.GOV website, The Startup Visa – Forbes, US Visas - Coming to America KPMG analysis
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
Silicon Valley
Business environment
Silicon Valley continues as the global leader as a tech start-up hub, which is supported by a legacy of funding firms
4
Business
environment
Continues as the global leader among tech start-up hubs
■ Highest concentration of high-tech workers, and the largest number of high net-worth individuals on a
per-capita basis of any major metropolitan area in the US
■
■
■
Presence of global tech vendors with noted records in promoting Fintech - Apple, Cisco Systems, eBay,
Google, HP, etc.
Well developed start-up ecosystem. Accelerators and incubators as well as prominent investors have
democratized resources, knowledge and created synergies. Standard investment terms are now publicly
available and crowdsourcing resources are accessible for both investors and entrepreneurs
Continues to remain the centre of tech innovation, while the start-up eco-system is spreading into other
parts of the US (NYC, Brooklyn, San Francisco Peninsula)
GAPS & CHALLENGES
■
■
Low work-life balance. Working marathon hours is part of Silicon Valley’s DNA due to the drive,
excitement, and intensity of the start-up culture
Regional hubs (Singapore, Hong Kong) as well as London’s position as a global Fintech hub challenging
Silicon Valley’s monopoly in the start-up space
Source: SBA.gov – SBA.GOV website, SCORE – Official website, StartUpNY – Startup.NY.GOV website, The Startup Visa – Forbes, US Visas - Coming to America KPMG analysis
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
New York
Unlocking the potential: the Fintech opportunity for Sydney
New York
Introduction
The concentration of financial institutions, skilled workers, start-ups and Fintech accelerators catapults New York into the top global Fintech
contenders. However, the city’s relatively low profile as a Fintech area is a key concern that limits its ability to attract influential capital when as
compared to Silicon Valley
Macro parameters
■
■
■
■
■
#4 in ease of doing business
(Doing Business report, 2014)
#2 among G-20 nations on the
e-trade readiness index
(EIU report, 2014)
#12 globally on the 2014 Economic
Freedom Index
US$ 17 trillion GDP in Q1 2014
2.1 percent inflation (CPI) in
May 2014
State of the Fintech sector
■
■
■
Flatiron District
New York’s Fintech ecosystem is
concentrated within Lower Manhattan,
Flatiron District, and Brooklyn
neighborhoods
In recent years, several Fintech
accelerators (Fintech Innovation Lab and
Barclays Accelerator ) and Fintech focused
VCs ( such as the Fintech Collective, Inc.)
have been set up in New York City
Lower Manhattan
Brooklyn
31 percent growth in deal volume
annually, in the past five years
17 Fintech deals and $151.4 million
in total investments in Q1 2014
43,000 Fintech professionals with
25 miles of New York City
Source: Doing Business 2014 – The World Bank; “The G-20 E-trade Readiness Index” - article by ZDNet;’ “2014 Index of Economic Freedom” – The Heritage Group; “GDP of the United States of America” – Bureau of
Economic Analysis; “The Rise of Fintech - New York’s Opportunity for Tech Leadership” - Accenture
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
New York
Government support (1/2)
Fintech businesses in New York benefit from government funding at the center, city and university level
1
“
Government funding
Extent of
Government
support
■
■
■
Right now in one of those
classrooms there are students
wresting with how to turn their big
idea -- their Intel or Instagram -- into
a big business. We're giving them
all the skills they need to figure that
out, but then we're going to turn
around and tell them to start that
business and create those jobs in
India or China or Mexico or
someplace else. That's not how you
grow new industries in America.
That's how you give new industries
to our competitors.
”
Barack Obama,
President, United States of America
‘Start-up America’ – a White House initiative launched in 2012, aims to accelerate high-growth entrepreneurship
throughout the nation by brining together entrepreneurs, corporations, universities, foundations and experts
State Small Business Credit Initiative (SSBCI): In 2010 President Obama signed into law which was funded with
$1.5 billion to strengthen state programs that support lending to small businesses and small manufacturers.
New York State’s Innovative NY Fund:
-
Seed stage business equity fund with up to $45 million to support innovation, job creation, and high growth
entrepreneurship
-
Supported with $35 million in State funds and $10 million from Goldman Sachs
-
Expected to leverage over $450 million in additional private investment for small businesses
■
■
start-up NY – provides major incentives for businesses to relocate, start up or significantly expand in New York State
through affiliations with public and private universities, colleges and community colleges
NYCEF (New York City Entrepreneurial Fund): The City created the $22 million fund – the first of its kind outside
Silicon Valley – aimed at providing New York City-based technology start-up companies with early-stage capital
Visa policy & immigration
■
■
In June 2013, the Senate proposed start-up Visa (or EB6). Venture capital investment firms and entrepreneurs from
abroad are currently disappointed as this is not been enacted yet
However, the US already has viable visa solutions to encourage start-ups. And although not perfect, these visas
have long been available and used successfully. Examples are – O-1 and EB1A Extraordinary Ability Visas, E-2 and
EB5 Investor Visas, H-1B and EB2 or EB3 Professional Visas, L-1A and EB1C Multinational Manager/Executive
Visas etc.
Source: InnocvativeNY – ESD.NY.GOV, SSBCI – US Treasury website, NYCEF – Applied Sciences – NYCEDC website , StartUpNY – Startup.NY.GOV website, Whitehouse - Startup America Factsheet –
Official website of The White House, US Visas - Coming to America – The Startup Visa - Forbes, KPMG analysis
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
New York
Government support (2/2)
Tax structure and incentives for start-ups are favorable. And although the govt. intends to relax visa/immigration laws for non-American
entrepreneurs, these are still seen as a significant challenge when foreigners are setting up businesses in the country
1
Extent of
Government
support
Tax structure and incentives
■ American Taxpayer Relief Act (ATRA) – At the central level, the Act helps small businesses by providing
tax breaks which include items such as bonus depreciation, deduction on certain acquisitions, R&D tax
credit, 100 percent tax-free capital gains on sale of small-business stock etc.
■
Start-Up NY – is the city Governor’s initiative to transform Start-Up NY campuses and other university
communities across the state into tax-free communities for new and expanding businesses. This initiative
enables business to locate in these zones and operate 100 percent free of tax for 10 years in the
following categories:
-
Income tax.
- Property tax
-
Business or corporate state or local taxes
- Franchise fees
-
Sales tax
GAPS & CHALLENGES
■ Stringent visa/immigration
procedures: Proposed ‘start-up
Visa’ act has not been enacted yet.
And while non-American
entrepreneurs do get visas, the
process is described to be complex
and “something to worry about”
Other initiatives
■ Small Business Development Centers (SBDCs) provide a vast array of technical assistance to small
businesses and aspiring entrepreneurs
■
SCORE, supported by the U.S. Small Business Administration (SBA), is a non-profit association
dedicated to helping small businesses across the US grow and achieve their goals
Source: SBA.gov – SBA.GOV website, SCORE – Official website, StartUpNY – Startup.NY.GOV website, The Startup Visa – Forbes, US Visas - Coming to America KPMG analysis
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
New York
Access to funding
Technology start-ups in New York enjoy access to a combination of VC funded and financial services-sponsored funding initiatives.
2
Access to Funding
Tax structure and incentives
■ Raking: In terms of total VC invested in technology start-ups, NYC ranks No. 2 in the US, only behind
Silicon Valley. It has been the fastest-growing tech. start-up ecosystem in the U.S over the past 10 years
■
■
■
■
■
“
Financial services-sponsored VC
will continue to grow as institutions
recognize that the go-it-alone
approach of in-house development
isn’t enough.
”
Jaidev Shergill,
Capital One, head of digital venture
investing and start-up business
development
Growth: Over the past 5 years, the CAGR for Fintech related deals grew by 31 percent annually,
compared to Silicon Valley’s 13 percent, and investment grew 45 percent annually, compared to Silicon
Valley’s 23 percent
Specific examples of VC initiatives in New York:
OnDeck, a peer-to-peer lending platform, has advanced more than $1 billion in loans
LearnVest, a personal finance platform founded in 2009, added $28 million of VC funding in April 2014
Kickstarter: the largest crowd funding platform for creative projects, has raised $1.1 billion from 6.4
million participants supporting 63,000 projects. It has received $10 million in VC funding
GAPS & CHALLENGES
■
Relative to the Silicon Valley, a
low Fintech profile affects ability
to attract large capital. So while
the absolute number of deals is
increasing drastically, the average
value of each deal in New York is
significantly lower than the Silicon
Valley
Information Technology Venture Capital Invested (Billion US$)
CAGR = 6.4%
9.1
CAGR = 13.3%
CAGR = -1.7%
4.9
2.6
1.6
0.7
1.4
2003
2013
NY Metro
Massachussets
Silicon Valley
Source: CB Insights – Venture Capital: Silicon Valley – CB Insights; KPMG analysis
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
New York
Availability of skill and talent ; Business environment
3
Skill and talent
4
Business environment
Mature and highly successful programs in place to develop
technical skills; these programs are intended to drive
economic growth of the city
The concentration of Financial institutions, start-ups and
accelerators makes the general business environment in New
York favorable
■
■
Applied Sciences NYC: Robust initiative in place to grow the economy by
developing technology related skills; Projected economic impact over 30 years
is over $33.2 billion
-
Jan 2014: Cornell and Israel Institute of Technology to build applied science
and engineering campus on Roosevelt Island. City provides site and $100
million
-
Nov 2013: Fourth applied sciences program announced at Carnegie Melon
University
Growth
-
Fintech in NYC has grown at twice the rate of
the Silicon Valley over the past 5 years
-
In terms of absolute size, its Fintech cluster is
second only to Silicon Valley
■
New York’s Fintech Innovation Lab
-
Currently in its fourth year
-
Aug 2012: Computer Science Masters of Engineering introduced at Cornell
NYC Tech
-
Has had 18 previous alumni
-
Raised a combined $76 million
-
Jul 2012: Columbia University announces new institutes for data sciences and
engineering
-
One start-up was acquired for $175 million
■
Access to a large potential customer base
■
■
May 2012: Google donates 22,000 sq. ft. of its headquarters to Cornell NYC
Tech while the university completes new campus
-
Google, Facebook, Twitter, Amazon and eBay are growing New York offices.
This is increasing increasingly bringing engineering talent into the city
■
New York is known to have a strong financial
sector and as these potential clients are
realizing the benefits of having easy access to
technology resources
Worldwide Investor Network: An accelerator
program that aims to discover companies from
around the globe and bring them to NYC
“
Cornell University
and our extraordinary
partner, The TechnionIsrael Institute of
Technology, are
deeply gratified to
have the opportunity to
realize Mayor
Bloomberg's vision for
New York City: to
prepare tomorrow's
expanding talent pool
of tech leaders and
entrepreneurs to work
with the city's key
industries in growing
tomorrow's innovation
ecosystem.
”
David J. Skorton,
President, Cornell University
Source: Cornell, Applied Sciences NYC, Worldwide development fund, KPMG analysis
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
London
London
Unlocking the potential: the Fintech opportunity for Sydney
Introduction
London’s proximity to a thriving financial hub, coupled with access to killed Fintech professionals, favorable government, and a supportive
ecosystem elevates it among the big league of global Fintech hubs. However, availability of mid-size funding and a weak IPO market remain
key concerns
Macro parameters
■
■
■
■
■
#11 in ease of doing business (EIU
report, 2014)
#1 among G-20 nations on the etrade readiness index (EIU report,
2014)
#3 globally on the 2014 Economic
Freedom Index
East London is a predominant
technology cluster for the city
Canary Wharf
US$ 2522.26 billion GDP in 2013
2.9 percent inflation (CPI) in Mar
2014
The insurance industry is focused around the eastern
side of the city while a secondary financial district exists
outside of the city at Canary Wharf
State of the Fintech sector
■
■
■
84 Fintech deals took place in the UK
between 2003-13
44,000 Fintech professionals within
25 miles of London
$675 million in investments between
2003-13
Source: Doing Business 2013 – World Bank, UK GDP – Trading Economics; 2014 Index of Economic Freedom; The Economist Intelligence Unit - The G20 e-Trade Readiness Index; “Digital tech can give London a
$20 billion boost in a decade – study” – Reuters Industry articles and news
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
London
Government support (1/3)
Fintech businesses in London enjoy support from a government that encourages entrepreneurship to accelerate overall economic growth
1
“
Extent of
Government
support
UK Trade and Investment’s growth
acceleration work is best in class in
Europe for entrepreneurs. I have
witnessed first-hand their
experienced entrepreneurs at work
and their team of dealmakers is a
hugely valuable addition to our
network.
”
William Stevens, International
Accelerator Programme, Europe Unlimited
“
For us, Financial Technology is a
really unique position here in the UK
– we have the talent, technology,
and the experience background to
be a leader in Financial Technology.
”
Gavin Cleary, COO of
UKTI Financial Services Organisation
Government funding
■ UK Angel CoFund – An early stage matching fund to support the growth of angel investment sector.
■ Start-Up Loan Scheme – Provides seed capital and mentoring to early stage businesses.
■ Enterprise Capital Fund Program – Supports the creation of new early stage venture capital funds.
■ UK Innovation Investment Fund – Co-invests with private investors in high growth, knowledge-based
businesses.
■
■
Business Finance Partnership – Enables increased access to finance by providing matching funds.
Future Fifty Program – A matching program for fifty of the most promising high-growth companies with
publicly funded schemes and incentives relevant to their stage of growth and specific needs.
UK Trade and Investment (UKTI)
The UK government – via the UK Trade & Investment (UKTI) - The Financial Services Organization
(FSO), and Her Majesty’s Treasury aims to create ideal conditions for a thriving financial technology
sector in London
■
■
Financial technology is a focus area for the UKTI – aims to attract inward investment as well as
support companies, including those in the Fintech sector, expand their operations globally.
According to Gavin Cleary, COO of UKTI Financial Services Organisation, UKTI’s ‘commercial
diplomats’ across its global network of 103 offices aid ‘indigenous’ Fintech companies to grow
internationally and make more money.
Source: “Gavin Cleary - COO UKTI Financial Services Organisation at The Fintech50 2014” – YouTubeGOV.UK website: “Crossroads - An action plan to develop a vibrant tech start-up ecosystem in Australia” –
start-upAus (April 2013), accessed July 2014, Industry reporting, KPMG analysis
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
London
Government support (2/3)
The government provides relevant tax relief to new businesses and also stimulates the inflow of entrepreneurs into the city
1
Extent of
Government
support
Tax structure and incentives
■ Entrepreneurs’ Relief Program – Offers a reduction in capital gains tax rate of 10 percent for founders of
start-up firms who sell or give away their businesses.
■
Enterprise Investment Scheme (EIS) / Seed Enterprise Investment Scheme (SEIS) – Encourages
investment into early stage, high-risk businesses and provides an upfront income tax relief of 30 percent
and 50 percent, respectively. The scheme also provides capital gains tax exemption and is valid until the
end of 2014.
Other initiatives
■ Entrepreneur Visa Scheme – Introduced in 2008 to attract entrepreneurs from across the world to
establish their business in the UK
“
Many of these entrepreneurs will
have been attracted to some of the
UK's fastest-growing business
sectors, such as the UK's rapidly
expanding IT start-up sector, which
is centered around 'Silicon
Roundabout' in London.
”
Simon Horsfield ,
Immigration Expert, Pinsent Masons
■
Global Entrepreneur Programme – Run by the UKTI to attract high caliber, early stage companies and
entrepreneurs to set up in the UK . Under the program, participants are offered bespoke advice and
capital raising assistance from a team of experienced entrepreneurs.
The country’s inability to ‘cope up with immigration’ - with increasing pressure on public services has
resulted in the UK government taking a cautious stance on influx of skilled foreign nationals over the
years. Recently, the Home Office tightened the "entrepreneur" visa scheme after checks revealed a
scam involving potentially thousands of bogus applications.
Source: “Entrepreneur Visa Scheme”; “Global Entrepreneur Program” – GOV.UK website; “Entrepreneurs Relief Program” – Howlader & Company ;“Enterprise Investment Scheme/Seed Enterprise Investment Scheme”, 'Entrepreneur' visa
scheme tightened after new scam uncovered” – The Telegraph, “Crossroads - An action plan to develop a vibrant tech start-up ecosystem in Australia” – start-upAus (April 2013), accessed July 2014, Industry reporting, KPMG analysis
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
London
Government support (3/3)
Amidst an overall positive environment, the relatively weaker IPO market in the UK poses some challenges to the start-up ecosystem
1
Extent of
Government
support
Other initiatives
■ The Financial Conduct Authority (FCA) of UK launched ‘Project Innovate’ – aimed to ensure that UK
financial technology companies are supported by the country’s regulatory environment.
■
■
“
We are competing in a global race and
I am absolutely determined to make
Britain the best place in the world in
which to start and grow a business.
The world of business is changing
rapidly and one of the most promising
opportunities for new jobs and growth
lies within a new wave of high growth,
highly innovative digital businesses.
David Cameron,
British Prime Minister
In 2013, The London Stock Exchange introduced changes to IPO regulations by allowing highgrowth companies to make initial public offerings with just 10 percent of their stock, compared to a
standard requirement of 25 percent. This move was primarily to enable higher rates of technology
company listings in the UK.
Established institutions such as the Technology Strategy Board as UK's foremost innovation agency, to
oversee innovation programs and accelerate economic growth
GAPS & CHALLENGES
■
■
Most Fintech ventures in the UK are still in their infancy.
The UK has a relatively weak IPO market (compared to the US); start-ups believe that higher valuations
and better exit options are available elsewhere
”
Source:; “LSE changes rules to boost tech companies in Britain” – The Telegraph; “Fintech sector to launch new industry body” – start-ups.co.uk, “Economic Secretary on new financial technology” – GOV.UK, accessed July 2014,
Industry reporting, KPMG analysis
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
London
Access to funding
London Fintech start-ups have increased access to funding, especially early stage funding. However, the lack of late stage funding is hindering
businesses from scaling up
2
“
■
Access to
Funding
-
The determination and tenacity of
those driving crowdfunding in the
U.K. - despite a lack of clear
regulation and heavyweight
incumbents – has made it work.
”
Simon Devonshire,
Director, Wayra Europe
“
There’s a very clear message
coming from banks…they are
interested in opening up their supply
chain. RBS and Lloyds are doing a
lot in this space and recognising the
opportunities of having a more
efficient supply chain.
”
Gavin Cleary, COO of
UKTI Financial Services Organisation
■
■
Crowdfunding - Crowdfunding companies in the UK issued £480 million (US$803 million) in loans and
bought £28 million in unlisted securities in 2013– up 150 percent from 2012
However, entrepreneurs and industry analysts view FCA’s new regulations on crowd funding (Apr ‘14)
that restrict investments by inexperienced investors in unlisted business as a hindrance to funding efforts
Financial services firms showing interest; accounted for 6 percent of venture investments in Fintech in the
UK and Ireland in 2013, up from 3 percent in 2012.
London has been witnessing a steep rise in Fintech activity, especially in the past decade
-
According to research firm CB Insights, 84 Fintech deals took place in the UK between 2003-13 grossing
US$675 million in investments
-
Between 2008-13, the CAGR for Fintech financing in the UK was twice the global average and twice that
of Silicon Valley; partly due to a string of dubious events in the past year such as mis-selling and ratefixing scandals, rogue trading
GAPS & CHALLENGES
■ Venture capital investments focused on Fintech in London are still mostly first round
■ Availability of funding remains scarce compared to the US - Companies in the UK and Ireland netted less
than US$785 million since 2004 while Fintech companies in Silicon Valley received ~ $950 million in
funding in 2013 alone
“
London and Europe are becoming more competitive at the early stage – with a number of seed and
Series A funds being created. But what they are missing is the C, D and E rounds, so we think the
opportunity is moving to the expansion stage.
Source: CB Insights – Venture Capital: Silicon Valley – CB Insights; KPMG analysis
”
Matt Harris, Bain Capital Ventures
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
London
Availability of skill and talent (1/2)
Proximity to London’s financial services hub ensures ready access to skilled professionals
3
Skill and talent
Proximity and availability of skilled workforce
■ According to research by South Mountain Economics (published in June 2014), there are an estimated
44,000 Fintech workers within 25 miles of London, compared with 43,000 for New York and only 11,000
for San Francisco-Silicon Valley
“
-
London boasts of superior Fintech credentials – Per Financial News’ Fintech 40 power list for Europe,
three-quarters of the people named as industry influencers are based in the British capital.
-
Four of the world’s ten biggest banks with global or European headquarters situated in London.
-
135,000 financial-services technology workers in the UK ; ~40 percent of London’s workforce is
employed in the financial services or tech sector’s.
-
More than 24,000 tech firms set up shop in London, supporting some 48,000 jobs
Financial services are a major
component of the British
economy, so there's expertise in
the market place. That's why
many Fintech businesses are
choosing London.
Claire Cockerton,
Deputy Head of Level39
”
Source: “The Boom in Global Fintech Investment- A new growth opportunity for London” – Accenture, “Digital tech can give London a $20 billion boost in a decade – study” – Reuters; “London flexes Fintech muscle in
Financial News list”-TechCityNews, accessed July 2014, Industry reporting, KPMG analysis
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
London
Availability of skill and talent (2/2)
The education system provides considerable fillip to entrepreneurial studies; however, UK entrepreneurs face soft skill drawbacks –such as the
ability to commercialize new ideas
3
“
Skill and talent
Proximity and availability of skilled workforce
■ Education and Curriculum
Britain was built on the
dynamism and graft of its
entrepreneurs and our country’s
future will be no different. That’s
why we’re investing in the skills
and energy of young people, no
matter where in the UK they’re
from or what their background,
so that we continue to be
competitive and successful.
Justine Greening, International
Development Secretary
”
-
In March 2014, launched ICS Entrepreneur - a volunteering scheme that nurtures young entrepreneurs
aged 18-25 years to hone their business skills, confidence and knowledge of overseas markets
-
The Department of Education(DoE) introduced a technical baccalaureate (Apr ‘13) targeted at college
students interested in developing skills and pursuing careers in areas such as information technology and
digital media.
-
DoE also recently mandated a ‘programming ‘curriculum in all primary and secondary schools. The
curriculum is designed with input from the Royal Society of Engineering, and industry leaders such as
Google and Microsoft and also offers a £500,000 fund to train teachers in software coding.
-
Several institutions of global repute such as University of Oxford, University of Cambridge, London
School of Economics and Political Science are based in and around the city.
“
As the global centre of financial services and a tech
hub, London gives Fintech entrepreneurs access to
an unparalleled pool of talent, from developers to
product managers to compliance officers to sales
Ismail Ahmad, Fintech entrepreneur
(WorldRemit)
”
GAPS & CHALLENGES
■
■
Entrepreneurs less focused when it
comes to commercializing new ideas
Fintech start-ups lack the expertise,
access, and resources to effectively
sell to and collaborate with banks
Source:“'Tech Bacc' aims to boost status of vocational courses”; “Year of Code and £500,000 fund to inspire future tech experts launched”: ICS Entrepreneur scheme – GOV.UK,” Europe’s Mid-Size Fintech Firms Stuck in
Funding Gap “ - Wall Street Journal, accessed July 2014, Industry reporting, KPMG analysis
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
London
Business environment
A strong tech sector and a thriving FS sector give London the right business environment for becoming a Fintech hub
4
Business
environment
Continues as the global leader among tech start-up hubs
■ A thriving financial services sector : London is counted among the leading financial services hubs in the world
■ A growing tech sector: The UK technology industry experienced high growth in the final quarter of 2013, marking
some of the biggest performance increases in the sector in nearly a decade
■
FS firms opening up to tech start-ups : Financial services and banking institutions in London are willing to partner and
collaborate with financial technology firms to transform their traditional offerings
-
Santander launched a US$100 million Fintech fund that will initially focus on digital delivery of financial services,
online lending, e-financial services, and big data analytics ( July 2014)
-
Five major UK financial services firms: HSBC, First Direct, Nationwide, Santander and Metro Bank partnered with
Zapp, mobile payments technology provider to enhance its existing phone and tablet banking apps ( January 2014)
■
Growing support for Fintech
-
London has been recently hosting the inaugural Fintech Week, a series of mini conferences, exhibitions and
networking events for the sector’s main players – and those who hope to join them
-
Interest from London’s entrepreneurs in Fintech has also risen dramatically during the last 18 months. Per Eddie
George, founder of Fintech network NewFinance, the network’s London membership tripled in 2013
-
Two new Fintech accelerators in 2014 – The Barclays Accelerator, in partnership with Techstars and startup
bootcamp, backed by MasterCard, Lloyds Banking Group and Rabobank
■
-
UK’s financial technology sector is expected to officially launch an industry body in July 2014 together representatives
from leading Fintech start-ups and large banks onto a common platform
Innovate Finance, previously Fintech UK will start with about 50 member companies and has won £600,000 backing
from the City of London Corporation and Canary Wharf Group. The body will be based in Canary Wharf.
Source: “The Boom in Global Fintech Investment- A new growth opportunity for London” - Accenture, Barclays Fintech Accelerator Program and start-upbootcamp, “UK banks sign up to Zapp mobile payments” “New
Industry Body to be based in Canary Wharf”; Santander Fintech fund, accessed July 2014, Industry reporting, KPMG research
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Tel Aviv
Tel Aviv
Unlocking the potential: the Fintech opportunity for Sydney
Introduction
Israel’s high innovation quotient and the surge in interest among global and local banking players in the city is driving the Fintech sector in Tel
Aviv. However, support from other Fintech hubs- notably London and Hong Kong is also driving entrepreneurs to expand beyond Israeli borders
Macro parameters
■
■
■
■
Rothschild Boulevard - also known as the
Silicon Boulevard, houses the offices of many
start-ups in Tel Aviv
#35 in ease of doing business (Doing
Business report, 2014)
The growth in Fintech in the city is driven by
several banks setting up R&D centers (Barclays
& Citi ) and incubators (Bank Leumi )
#44 globally on the 2014 Economic
Freedom Index
US$ 305.7 billion GDP in April 2014
0.1 percent inflation (CPI) in Apr-May
2014
Rothschild Boulevard
State of the Fintech sector
■
■
Emergence of Fintech accelerator
programs, driving increased interest
in Fintech among Tel Aviv start-ups
9 start-ups as part of Israel’s recent
Fintech delegation to Hong Kong
Source: Doing Business 2014 – The World Bank ’ “2014 Index of Economic Freedom” – The Heritage Group; “GDP of Israel” – International Monetary Fund; Israel Inflation – Inflation.EU, Israeli Fintech Delegation-Hong Kong,
accessed July 2014, Industry reporting, KPMG analysis
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
Tel Aviv
Government support (1/2)
Tel Aviv’s government proactively supports entrepreneurs and start-ups through funding and tax breaks
1
Extent of
Government
support
Government funding
■ Yozma Fund (closed to new startups): The fund was set up to attract foreign direct venture capital
investment into Israel. To incentivize inward investment, foreign investors were offered matched funding
at a rate of two to one. That is, for every dollar a foreign investor committed to an Israeli entrepreneur, the
government committed an additional two. To provide further up-side incentive, the government offered
investors the option of buying out the government’s stake in the fund after a period of five years
■
■
The Tnufa provides pre-seed funding to of up to $50k (maximum of 85% of costs) for early stage
activities such as financial feasibility analysis, prototype development, etc.
Chief Scientist R&D Development Fund: This program gives new R&D facilities access to grants covering
20-50% of a start-up’s estimated R&D costs. In return the Government is entitles to royalties in the range
of 3-3.5% of annual revenues
Tax breaks
■ Tax breaks are given to venture capital backed accelerators who set up in the city. The Angel Act (2011)
provides tax incentives to angel investors who invest in seed companies.
■
Recently, in July 2014, the ministries proposed simpler criteria for tax incentives to encourage seed-stage
investments (Angels Act 2). Under the new plan (which would come into effect in 2015), to claim the tax
benefits, one will have to invest in start-ups that are less than three years old, earn no more than 1.5
million Shekels (~US$0.44 million) in annual revenue, and incur expenses up to 3 million Shekels
(US$0.88 million).
Source: “Fintech brochure 2014” Israel Export Ministry; “Magnet cities – Tel Aviv” – KPMG: “Israel to expand tax breaks to boost investment in start-ups” – Reuters/Al-Arabiya (16 July 2014), KPMG analysis
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
Tel Aviv
Government support (1/2)
The government also supports start-ups through events and shared workspaces. A start-up friendly visa policy is being considered
1
Extent of
Government
support
Sponsor events to cultivate the start-up industry
■ Yozma Fund (closed to new startups): FIN-TECH, Tel- Aviv 2014: It is the 1st International Conference
on Financial Technology convened by The Israel Export & International Cooperation Institute and Ministry
of Economy. The event is planned to be held in September 16-18, 2014, in Tel Aviv.
■
■
Go 4 Israel: the 12th edition of “go 4 Europe” conference (http://www.go4eu.com/)
MIXiii: “Mix Israel Innovation International” – Israel innovation conference (http://www.mixiii.com/)
Shared/co-working spaces
The city government has converted a number of municipal facilities such as city libraries into incubator startup spaces.
■
The Library: The Library in the historic Shalom Tower provides a shared working space and hub facilities
for teams dedicated to developing internet start-ups and new technology companies. Teams of start-ups
apply to be based at The Library for a period of about four months. In return, start-ups teams pay a
subsidized rate of US$70 per month for the facilities.
Visa policy
■ The government is reviewing its visa policy with the aim of introducing a “start-up visa” regime that would
make it easier for skilled foreigners to come and work in Israel.
Source: “Fintech brochure 2014” Israel Export Ministry; “Magnet cities – Tel Aviv” – KPMG: “Israel aims to grow from start-up nation to scale-up nation” – Financial Times (January 2014), KPMG analysis
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
Tel Aviv
Availability of skill and talent
With a robust education system, and a strong technology base rooted in mandatory military service, Tel Aviv has a considerable skill pool
3
Skill and talent
Robust education infrastructure…
■ Four universities and several colleges offer a
wide range of programs with special focus on
research delivered in English. Well regarded
institutions include Tel Aviv University and
Technion (Israel Institute of Technology)
■
..and a strong tech base
stemming from mandatory 'tech
intensive' military service…
■ All Israelis must spend two (women) or three
(men) years in the Israeli Defense Force (IDF).
The IDF is very technology oriented and
following service many Israelis use this
knowledge to develop new communications and
web-based technologies.
Tel Aviv University, the largest university in
Israel, is reputed for its research courses and
programs. The University has:
-
130 research institutes and 400 labs
-
30,000 students (of whom 14,000 are Master’s
and Doctoral candidates)
-
Filed 2,400 patents till date
■
This military-trained alumni base also become
recruitment targets by global technology
companies such as IBM, Cisco, Microsoft and
Google.
…gives Tel Aviv a considerable skill pool
■ One-third of the Israeli population is in the productive age group of 18 to 35.
■ 135 out of every 10,000 workers in Israel are scientists and engineers; in the US, this number is only 85
■ Nine out of every 1,000 workers are engaged in R&D, nearly double that in the US and Japan.
Source: “Magnet cities – Tel Aviv” – KPMG: Tel-Aviv Municipality website accessed on 17 July 2014; Israel Institute of Technology website accessed on 17 July 2014; Tel Aviv University website accessed on 17 July 2014
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
Tel Aviv
Business environment
A positive business environment is attracting global FS institutions to Israel despite the high degree of geo-political volatility
3
Business
environment
Global banks are setting up innovation labs and other R&D facilities in
Israel
■ Citibank set up a technology innovation center in Israel in 2011, followed by a data intelligence lab in
Global Rankings:
■
■
■
2013
EIU’s business environment rakings
2014: 21st position
Barclay’s has established an in-house R&D center in the city
Local banks are also realizing the opportunity and investing in Fintech:
Global ease of doing business
rankings 2014: 35th position
■
Global financial centers 2014: 21st
position
“
■
While Israel is at the forefront of
technology and has great
experience in creating successful
startups, this move is intended to
grow and enhance the country's
involvement and participation in the
development of financial technology
around the world.
”
Lyron Wahrmann, Head of Citi
Innovation Lab, Tel Aviv
■
Leumi has partnered with Elevator (Israeli investment fund focused on start-ups) in the establishment of
an accelerator program.
Bank Hapoalim is planning to invest US$23 million in Fintech “to turn Bank Hapoalim into a home for
technology companies that are developing products for the financial industry,”, according to Bank
Hapoalim Chairman Yair Seroussi
Several accelerator programs in the city help startups. An example is
Junction
The Junction is an accelerator that was set up by Genesis Partners, an Israeli Venture Capital firm, in
southern Tel Aviv. On average 150 companies compete for one of the coveted 20 places on a three month
wave. The aspiring entrepreneurs work together in a modern loft-style space, coding prototypes and writing
business plans. Partners and Directors from Genesis Partners coach the aspiring entrepreneurs as they
develop their propositions, business and funding plans.
Source: “FinTech brochure 2014” Israel Export Ministry; “Magnet cities – Tel Aviv” – KPMG: “Citi Launches the First Financial Technology Accelerator Program in Israel” – Citi Group (31 July 2013); GFCI - Global Financial
Centers Index report, March 2014; EIU business ranking, July 2014; World Bank, Ease of doing business report, 2014
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
Tel Aviv
VC funding
Israeli high-tech companies have adequate access to funding, mostly from VCs. However seed-stage funding makes up a low proportion of total
funding
2
Access to
Funding
■
■
■
Crowdfunding - Israeli high-tech companies raised US$1.6 billion in the first half of 2014, an increase of
81 percent 2013, making it the strongest capital raising period on record for the Israel's high-tech
industry, according to the Israel Venture Capital (IVC) Research Center.
Currently, around 70 venture capital funds are active in Israel, of which 14 international VCs with Israeli
offices and additional 220 international funds which actively invest in Israel.
Several leading US and European VC funds have Israeli branches, namely Alta Berkeley Venture
Partners, Battery Ventures, Bessemer Venture Partners, BlueRun Ventures, Blumberg Capital, Bridge
Capital Fund (BCF), Canaan Partners, Defta Partners, Lightspeed Venture Partners, and more.
GAPS & CHALLENGES
■ Seed-stage funding is a small proportion of total funds raised by Israeli high-tech companies (5 percent of
the US$ 1.6 billion raised in H1 2014, down from 7 percent in H1 2013)
Source: Venture Capital in Israel, EIPA accessed 17 July 2014, “FinTech brochure 2014” Israel Export Ministry; “Magnet cities – Tel Aviv” – KPMG: EIU Viewswire accessed 17 July 2014; Worldbank website accessed on
17 July 2014
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Berlin
Unlocking the potential: the Fintech opportunity for Sydney
Berlin
Introduction
Berlin has locational and operational advantages over other European cities. However, the lack of robust government efforts, the limited
success of private funding and incubation programs and the absence of entrepreneur education is inhibiting growth of the Fintech hub
Macro parameters
■
■
■
■
■
#21 in ease of doing business (Doing
Business report, 2014)
#6 among G-20 nations on the etrade readiness index (EIU report,
2014)
#18 globally on the 2014 Economic
Freedom Index
US$ 3.6 trillion GDP in 2013
1.04 percent inflation (CPI) in June
2014
State of the Fintech sector
■
■
Mitte
English becoming more widely
spoken in Berlin, resulting in more
VCs and entrepreneurs from the US
eliciting interest
Berlin’s Mitte and Kreuzberg
neighborhoods among the
preferred locations for startup activity
The Factory is a campus for
start-ups and tech companies
in Berlin Mitte, at the heart of
a growing ecosystem
Kreuzberg
Berlin's Tempelhof Airport
being touted to be the city's
next start-up and tech hub
Over 20 Fintech start-ups in Berlin
Source: Doing Business 2014 – The World Bank ; “The G-20 E-trade Readiness Index” - article by ZDNet;’ “2014 Index of Economic Freedom” – The Heritage Group; “GDP of Germany” – Trading Economics; “Inflation in
Germany” – Trading Economics; Fintech Forum DACH
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
Berlin
Government support
Traditionally, the extent of government support in spurring a vibrant start-up landscape in Berlin has been low. This,
however, is now changing.
1
Extent of
Government
support
Berlin has traditionally received little government support in building a
start-up hub…
■ Berlin has a robust tech start-up landscape; however, government initiatives in encouraging an
■
entrepreneurship culture have been sparse
Since the city’s key industries are centred on tourism and culture, most of the government focus has
been on these areas and not on start-ups
– Start-up initiatives (such as The Factory) have been almost completely void of government
involvement
– Some degree of bureaucracy and red tapism surrounding startups in Berlin
– Lack of government funded co-working spaces or accelerator programs
…however, this is now changing, with the government trying to incubate
start-ups through several programs such as the following:
■ Technologiestiftung Berlin (TSB) Innovationsagentur, a government agency is helping tech start-ups by
■
■
building a network of researchers, policy-makers and established companies
Investitionsbank Berlin (IBB) provides dedicated funding for tech start-ups
The German government’s business start-up portal that helps ventures understand legal and tax
processes, and register their companies and
Source: Berlin builds businesses, McKinsey; Germany's Fintech rising stars- and their investors; Starting a Business; The Fintech Forum; Fintech – London, Berlin, Europe; Start-up boot-camp Berlin; European start-ups in Berlin
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Berlin
Unlocking the potential: the Fintech opportunity for Sydney
VC funding and skill availability
Some private VC funds and incubation programs have emerged, though their
success has been largely limited.
2
■
■
■
■
■
Access to Funding
Some private sector funds and incubation programs have emerged – however success has
been limited
Fintech Forum DACH emerged as the first event focused on Germany, Austria and
Switzerland, with an aim to identify innovators and disruptors in the FS sector
Start-up bootcamp has been trying to push Berlin as the start-up capital of smart cities and
innovation
Betahaus is a private accelerator and provider of co-working space in the city
Point 9 Capital invests in early-stage start-ups across Europe who are looking for initial
seed or Series A funding
GAPS & CHALLENGES
■ Germany’s share in the global Fintech M&A and investment space was less than 0.6 percent
■
■
■
in 2012
Structural shortage exist in securing follow on financiering
While the interest among international investors is growing, it has not yet translated into
sufficient action
VC funding and skill availability
While Berlin has the right prerequisites for a
skill pool, cultural factors have stymied
entrepreneurship
3
■
■
■
Skill and talent
With over 165,000 students, Berlin is the largest
university centre in German-speaking countries
and offers significant potential for recruiting new
talent
Berlin attracts a lot of young, talented people
which is important for building up an international
team
Significantly low costs for students
GAPS & CHALLENGES
■ Low interest among students and graduates in
■
starting businesses, particularly in the technology
space
Lack of entrepreneurial culture/education
There is a need to educate the investors in Berlin. They are still new to investing heavily in
tech start-ups
Source: Berlin builds businesses, McKinsey; Germany's Fintech rising stars- and their investors; Starting a Business; The Fintech Forum; Fintech – London, Berlin, Europe; Start-up boot-camp Berlin; European start-ups in Berlin
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
Berlin
Business environment
Though Berlin has some locational and macro-economic advantages over other European hubs, it still has not been able to
fully monetize the opportunities
4
“
Slowly emerging Fintech start-up eco-system
Business
environment
■
■
Early successful entrepreneurs
(turned business angels) now pump
their back capital into a burgeoning
scene. New Berlin entrepreneurs
share their know how and
experiences among each other, but
lack significant support from advisors
and mentors. In terms of living cost
and lifestyle, Berlin might be the best
place to start a company right now.
However, for scaling it, Berlin startups might consider relocating as the
ecosystem is not mature enough in
terms of capital, support
infrastructure, and mind-set
”
“The start-up Ecosystem
Report” by start-up Genome,
2014
■
■
■
■
■
Berlin does not have a very strong banking sector, which can hinder the growth of Fintech start-ups
With English becoming more widely spoken in Berlin and the German economy remaining robust, more VCs
and entrepreneurs from the US are considering investing in Berlin’s Fintech start-ups
Also, an increasing number of entrepreneurs without significant FS or ICT sector experience are trying to tap
Fintech opportunities
Considerable growth in accelerators and incubators, such as Axel Springer's Plug & Play, Berlin start-up
Academy, The Factory and initiatives from companies such as Mozilla, Microsoft and Google, as well as an
increasing number of events and ¬conferences
A growing job market. A new start-up is founded every 20 minutes in Berlin and the industry is set to produce
100,000 new jobs by 2020
Lower operational costs. Berlin is cheaper than several other European cities. Office overheads and the price
of living are cheaper, which gives entrepreneurs more to spend on innovation
Growing network within the city’s tech start-up community
GAPS & CHALLENGES
■ Red tapism and bureaucracy related challenges
■ Start-ups in their growth phase lack a centrally located co-working space
■ Start-ups lack a robust network with established companies and government agencies
Source: Berlin builds businesses, McKinsey; Germany's Fintech rising stars- and their investors; Starting a Business; The Fintech Forum; Fintech – London, Berlin, Europe; Start-up boot-camp Berlin; European start-ups in Berlin
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Hong Kong
Unlocking the potential: the Fintech opportunity for Sydney
Hong Kong
Government support (1/2)
The Hong Kong government has rolled out several funding, incubation and acceleration programs, as well as provides
critical infrastructure aimed at developing the territory as a Fintech hub. It is also aggressively attracting foreign start-ups to
set up tech ventures in the territory
1
Extent of
Government
support
The Hong Kong government’s focused strategy for developing a Fintech eco-system
■
■
■
■
Intends to leverage the strong FS sector in the country by developing Hong Kong as a financial tech innovation hub
State backed programs such as InvestHK or the ITC are funding co-work spaces and incubators across the territory
The government is proactively trying to attract start-ups from India and other Asian cities. Also luring Silicon Valley
companies such as Humdinger to shift their R&D and innovation to Hong Kong
Further, the government is collaborating with Israel to explore Fintech innovation opportunities
Prominent government programs for tech start-ups
Government agencies
■
■
■
InvestHK focuses on developing Fintech efforts by funding wide network of co-work spaces and incubators
The Innovation and Technology Commission (ITC) promotes R&D, and facilitates tech infrastructure development
Steering Committee on Innovation and Technology co-ordinates the formulation and implementation of innovation and tech policies and ensure synergy
among different elements of the innovation and tech program
Funding
■
■
The Innovation and Technology Fund (ITF) finances projects that contribute to innovation and IT. In Feb 2014, ~3,779 projects were approved, of which
2,206 are R&D projects
R&D Cash Rebate Scheme that incentivizes the research culture among enterprises
Infrastructure and Enablers
■
■
The Hong Kong Science and Technology Parks Corporation (HKSTPC) supports provides incubation, physical spaces for applied R&D activities, as well as
land and premises in the industrial estates for production
The Hong Kong Applied Science and Technology Research Institute Company Limited (ASTRI) supports start-ups in commercializing their R&D
Source: Hong Kong government factsheet; Fintech – leveraging Hong Kong’s strengths, Bloomberg; Israeli Fintech delegation to Hong Kong; Why should Hong Kong be your global launch pad
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
Hong Kong
Government support (2/2)
Cyberport is a government-funded program that provides co-working spaces to local start-ups as well as partners with global
accelerator programs such as Accenture Fintech Labs, Microsoft Ventures, and StartX
1
Extent of
Government
support
Government funded co-working and
acceleration space
■
■
“
Cyberport, Hong Kong’s
‘creative digital community’
has been drumming up a lot
of support for start-ups in the
past while, the latest being a
partnership with Microsoft
Ventures. Besides teaming up
with a tech giant to give startups an opportunity at global
exposure, Cyberport has also
announced a complimentary
accelerator support
programme and is now
accepting applications for
their seed fund.
”
■
The government funded Cyberport is a co-working
community with a cluster of more than 250 tech
and digital tenants
The program has funded 63 projects, organized
and participated in 29 collaborations and 55
showcases, reaching over 3,000 mainland and
overseas entrepreneurs
Cyberport has also partners with global tech giants
for co-sponsoring acceleration programs
– In June 2014, teamed up with Accenture for
providing the physical space for the Fintech
innovation lab
■
GAPS & CHALLENGES
Complicated visa process
■
■
If Hong Kong wants to attract entrepreneurs they need to
make the visa process fast, simple, and cheap. That means
the entire process needs to go online
Tax structure relatively higher
■
■
– In May 2014, Cyberport, partnered with
Microsoft Ventures to give local start-ups an
opportunity of global exposure
Further, Cyberport rolled out an accelerator
support programme and a seed fund to sponsor
creative and innovative ICT start-ups or related
business concepts
Securing a visa to live in Hong Kong took six months and
cost ~US$5,000 for the services of a visa consultant
■
Though Hong Kong has one of the lowest tax rates globally,
yet Singapore’s net effective personal income tax rate is
much lower
In Hong Kong, corporate tax is set at 16.5 percent of
assessable profits for corporations and 15 percent for
unincorporated businesses. existence of corporate tax is an
inhibitor for start-ups
In addition, Hong Kong unlike Singapore does not have
many industry-specific tax incentives to encourage foreign
investment
Herman Lam, CEO of Cyberport,
May 2014
Source: Hong Kong government factsheet; Cyberport Partners with Microsoft Ventures for New Accelerator Program with Seed Fund in Hong Kong; Accenture, Top Banks in Asia Launch ‘Fintech Innovation Lab Asia-Pacific’;
Cyberport annual report; Cyberport teams with Accenture
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
Hong Kong
Access to Funding
The VC landscape is emerging in Hong Kong with considerable funds pouring in through private equity as well as crowdsourcing.
However, lack of scale is an inhibitor
2
Access to
Funding
Private VC funding is growing
in Hong Kong
■
Private VC funding in Hong
Kong (by deal volume)
7
6
11
9
11
8
2009 2010 2011 2012 2013H1 2014
“
Ask Hong Kong start-up
founders about the
challenges facing their
ecosystem and you are likely
to hear one answer over and
over again: the lack of
funding opportunities.
Because Hong Kong’s startup industry is so new,
companies are still seen as
risky investments and many
high-worth individuals turn to
the property and banking
sectors instead
”
Tech Crunch, June 2014
■
“
The Hong Kong VC and Private
Equity Association (HKVCA)
indicates that considerable funding
is pouring in for local start-ups
– The average size of VC
investments was ~US$6 million
in H1 2014, compared to US$4
million for the whole of 2013
Foreign funding is also increasing in
the territory. US VC firm Sequoia
Capital recently joined the Tom
Group and other investors to invest
US$14 million in the Series A
funding
GAPS & CHALLENGES
■ Venture capital funding is gaining traction in Hong Kong, though the absolute
■
■
■
Hong Kong VC and Private
Equity Association , June 2014
”
Most technology start-ups still need help to strike deals with "angel" investors
for seed financing and venture capital firms for larger investments to expand
their businesses
Though crowd funding has gained traction, yet progress is slow and success in
sourcing funds appears harder than initially anticipated.
Further, unlike banks in California's hi-tech hub of Silicon Valley, those in
Hong Kong lack the expertise to fund technology start-ups
Equity crowdfunding platform for start-ups
■
■
What is more important, we have begun
to witness a re-emergence of homegrown venture firms that not only
demonstrate sophistication in investing
regionally or globally, but also have an
appetite for domestic investment
number and size of deals are miniscule when compared with those in the US
An increasing interest in tech start-ups have led to several platforms
connecting companies with potential investors
These include NEST, a Hong Kong incubator, has launched Investable.vc,
an accredited equity crowdfunding platform for start-ups. It also serve as
mentors and advisers
– Another venture, fund2.me is also facilitating crowd funding for local
start-ups. Investors get various forms of discounts (instead of direct
equity in the start-up) for the product once it is launched
Source: Venture capital showing more money for Hong Kong's tech start-ups; Hong Kong crowd funding site looking for momentum; How Venture Capital and Private Equity have provided Vitality to the Hong Kong Economy post
Global Financial Crisis, June 2014, HKVCA; Venture capital showing more money for Hong Kong's tech start-ups
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
Hong Kong
Availability to skill and talent
Proximity to Hong Kong’s financial hub and a growing culture of tech entrepreneurship ensures ready access to skilled
professionals
3
Skill and Talent
Proximity and availability of skilled workforce
■ The financial service industry employed ~230,000 people in 2013, representing 5.9 percent of the city’s entire
workforce
■
■
■
■
In the banking sector, Hong Kong is one of the largest banking centres in the world with 70 of the world’s top
100 present in the city
The IT sector employed 33 percent of Hong Kong’s workforce in 2012 with the majority employed in software
development
Universities offering specialized courses in entrepreneurship - Universities across Hong Kong (Chinese
University of Hong Kong, HKUST, The Hong Kong Polytechnic University) offer dedicated programs ranging
from full time MBA to short time focused courses on incubating, start-up modelling, etc.
Career development platform that helps connect employers with young talent - Platforms such as LIBBLER
provide an interface between Hong Kong’s start-ups and the local talent pool
GAPS & CHALLENGES
■ Gaps in management and marketing skills, in spite of strong technical knowledge
■ Lack of dedicated Fintech courses
Source: start-upHK; Hong Kong advantage, Washington Post;
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
Hong Kong
Business environment
Hong Kong’s native entrepreneurial culture, ease of setting up business and highly developed financial and ICT sectors
and increasing push by global tech vendors provides a ripe ground for Fintech innovation
4
Business
environment
■
■
Google and Accenture boosting Hong Kong’s
tech start-up space
■ In June 2014, Accenture launched the Hong Kong chapter of
■
■
■
Fintech innovation lab that creates an interface between the
prominent banks in ASPAC and 7 local start-ups
Earlier, in 2013, Google had announced plans to tap Hong Kong’s
natively entrepreneurial culture and help incubate start-ups in
partnership with the Chinese University of Hong Kong. Google
planned to offer mentorship to young entrepreneurs and sponsor
trips to Google’s headquarters in Mountain View, Calif.
GAPS & CHALLENGES
■ Smaller size of software industry
■ Lack of risk-seeking, early-stage funding
■ High property prices
■
■
■
Native entrepreneurial culture that supports new ventures. It is socially
acceptable to fail in a venture and move on to another
Strategic location – Hong Kong is in the same time zone as Beijing, Shanghai,
Singapore, Taipei, Manila, Kuala Lumpur and Perth. All Asia’s key markets are
less than four hours’ flight away. Hong Kong is also the gateway to Mainland
China
Ease of doing business –Hong Kong scores in terms of procedures for starting a
business, getting bank loans or other credit, applying for an electricity supply,
transferring properties and the ease of cross-border transactions.
Preferred location for foreign trade and investment – Contributing factors include
the strategic geographic location, synergies from Mainland China, and connected
networks with the rest of the world
Well developed communications infrastructure includes complete 4G and fibre
broadband coverage overhauled by 9 submarine cable systems, 17 overland
cable systems and eight satellites for external communications
Well established financial services industry - Hong Kong is one of the largest
banking centres in the world with 70 of the world’s top 100 banks having a
presence in the city. Hong Kong ranked #3 in the Global Financial Centres Index
High levels of IT spending, particularly in mobile, analytics and cloud computing
Source: Paul Orlando on Hong Kong start-ups; InvestHK website; WorldBank data bank
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Singapore
Unlocking the potential: the Fintech opportunity for Sydney
Singapore
Introduction
Singapore is an emerging Fintech hub, backed by a conducive business environment, the government’s aggressive strategy for growing the
tech start-up ecosystem and active participation by the country’s developed financial sector and foreign investors. However, it still remains a
smaller hub with some short-term macro-economic challenges
Macro parameters
■
■
■
■
■
#1 in ease of doing business (EIU
report, 2014)
Concentration of startups, incubators and
investors in the
Central district and
Marina Bay
#3 in the world for foreign trade and
investment (Globalisation Index 2012)
Marina Bay - the
emerging FI and start-up
destination
US$297.9 billion GDP in 2013
2.7 percent inflation (CPI) in May
2014
S$1.24 trading per USS
State of the Fintech sector
■
■
■
■
~200 banks with a total asset size of
almost US$2 trillion
~S$1.4 trillion assets under
management in insurance
S$26.2 billion in IT spending, up ~4.4
percent y-o-y
Central district – the
traditional FI hub
Innovation in cashless payments,
analytics and digital
Source: Worldbank databank; Singstat (Government of Singapore website), Futuregov.com, Techinasia, MAS website, Singapore Venture Capital & Private Equity Association website and reports; Infocomm Development
Authority of Singapore website and reports; The National Framework for Innovation and Enterprise website and reports;
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
Singapore
Government support (1/3)
The government provides significant support in attracting more private investors and eventually developing the local start-up
eco-system.
1
Extent of
Government
support
Government’s focused strategy for developing the tech start-up eco-system
■ Intends to develop the local tech start-up eco-system without making it a clone of hubs
■ Allocated ~S$100 million for early-stage start-ups within the broader S$16 billion scientific R&D budget
■ Expects the state backed start-up agenda to attract more private investors and incubators
■ Once the local eco-system is established, intends to scale back the level of involvement
■ Also attracting Australian start-ups (such as Sprooki) to relocate to Singapore
Prominent government programs for tech start-ups
Funding
■
“
We’ve been talking to government
agencies and they are very
excited to be able to connect with
this network of start-ups and
talent. This programme is bridging
what government needs and what
the community is interested and
can provide
”
■
SPRING – Complete or Co-investment financing for sector specific acceleration, commercialising ideas,
networking and assistance from multiple agencies
MDA i.Jam – Provides fund up to S$100,000 by founders or incubators
Incubation
■
■
■
i.Jam - Interactive Digital Media Program appointed incubators identify, nurture, and administer competent
start-ups
Technology Incubation Scheme – the government co-invests ~85 percent. Incubators pitch in the remaining
buy out the government's stake after three years
Incubator for Disruptive Enterprises and Start-ups (IDEAS)
Lee Wan Sie, Deputy Director
of IDA Labs, April 2014
Source: Worldbank databank; Singstat (Government of Singapore website), Futuregov.com, Techinasia, MAS website, Singapore Venture Capital & Private Equity Association website and reports; Infocomm Development
Authority of Singapore website and reports; The National Framework for Innovation and Enterprise website and reports;
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
Singapore
Government support (2/3)
The government provides critical enablers such as a conducive visa and tax regime and incentives to financial institutions for
innovating
1
Extent of
Government
support
Tax structure and incentives
■
■
■
■
■
Tax exemption for start-ups – Full tax exemption on a specified part of a start-up’s taxable income for the first three
consecutive years
Pioneer incentive scheme - Businesses that raise overall industry standards eligible for full corporate tax exemption on
qualifying profits for up to 15 years
Productivity and innovation credit scheme - ~400 percent deduction or allowances on ~$400,000 expenditure incurred
in qualifying innovative activities
Lower income and corporate tax rates
Low GST rates (7 percent) - below global (16.4 percent) and ASPAC (10.6 percent) averages
Visa policy & immigration
The Singapore government
is also actively considering a
pro-crowd funding legislation
■
Open Immigration policy facilitates the relocation of foreign entrepreneurs
– Singapore has a relaxed immigration policy, making it easier to gain Singapore Permanent Residence (PR) status
– EntrePass, the visa for foreign entrepreneurs is considered to be more flexible than other countries such as the UK
and the US
Incentive to banks and financial services institutions for innovation
■
■
■
■
The SPRING program encourages innovation in the country’s key sectors such as banking, along side incubating start-ups
It has accredited local banks such as the OCBC and Maybank with the Singapore Innovation Class (I-Class) certification
I-Class is national recognition for organisations that have management systems, underlying technologies and processes in place to achieve excellence
through innovation
Government programs such as these provide a fillip for Fintech innovation in the country
Source: Worldbank databank; Singstat (Government of Singapore website), Futuregov.com, Techinasia, MAS website, Singapore Venture Capital & Private Equity Association website and reports; Infocomm Development
Authority of Singapore website and reports; The National Framework for Innovation and Enterprise website and reports;
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
Singapore
Government support (3/3)
State-backed co- working spaces provide a platform for networking, incubation and acceleration. However, the government
policies on the whole lack Fintech focus
1
Extent of
Government
support
Government backed co-working spaces
■ The Infocomm Development Authority of Singapore (IDA)’s IDA Labs serve as co-working spaces for the community,
industry and government agencies
– The labs provide physical lab spaces for generating new ideas, developing new technologies and testing out proof
of concepts
■
– The IDA labs also partner with global IT vendors such as Intel, HP and Redhat for providing R&D resources,
enabling technologies and best practices from other geographic markets such as the US
In addition, IDA acts an accelerator – expediting the process of commercializing innovation ideas
– IDA’s accreditation program to help local start-ups position themselves as qualified vendors to potential
government and large enterprise buyers
– This helps start-ups to generate revenue from the early stages and reduce dependency on VC funding
GAPS & CHALLENGES
■ Most incentives focus on the overall tech start-up eco-system without any specific focus on Fintech (when compared to
■
■
other hubs such as London)
The government routing taxpayers' money to fund foreign entrepreneurs, instead of developing the local ecosystem
Recent changes in labor laws inhibiting employment in start-ups
Source: Worldbank databank; Singstat (Government of Singapore website), Futuregov.com, Techinasia, MAS website, Singapore Venture Capital & Private Equity Association website and reports; Infocomm Development
Authority of Singapore website and reports; The National Framework for Innovation and Enterprise website and reports;
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
Singapore
Access to Funding
Significant volumes of private equity, VC funding and bank financing are flowing in; however, lack of funding across
the start-up life cycle and start-ups being less receptive to PE sales pose challenges
2
Access to
Funding
Significant VC funding with participation from local as well as foreign entrepreneurs
■ ~$1.71 billion VC funding in tech start-ups in 2013. This puts Singapore ahead Hong Kong, Japan and South Korea
■ Deal flows for local VCs are varied – Encompass wide range of technologies and attract entrepreneurs across ASPAC.
■
■
■
■
This leads to complex deal evaluation and due diligence
Deal syndication is common due to the relatively small number of VCs in the country and the lack of a sizeable VC pool
that can take great risk
Mature start-ups attract more foreign investments than early stage ventures
Exits are primarily made through trade sales with foreign companies or IPOs at the local stock exchange
Singapore banks actively engaging in funding tech innovation ventures. Banks such as the OCBC provide funding for
start-ups as old as 6 months. Do not need collateral or audited statements
GAPS & CHALLENGES
■ Lack of funding across the venture’s life-cycle. Many start-ups failed after their initial funding was depleted
■ Singapore’s status as a highly developed financial hub acts as an inhibitor for private funding, as local ventures carry a
■
premium price compared to other Southeast Asian countries
Start-ups less receptive to private equity sales and unwilling to give up management control
Source: Singapore Venture Capital & Private Equity Association website and reports; Guidemeinsingaproe
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
Singapore
Availability to skill and talent
Proximity to Singapore’s financial hub and a growing culture of tech entrepreneurship ensures ready access to skilled
professionals
3
Skill and
Talent
Proximity and availability of skilled workforce
■ Three of ASPAC’s largest banks (DBS, OCBC, United Overseas Bank) situated in Singapore
■ 5.5 percent of total workforce employed in the financial services sector
■ 146,700 people employed in Singapore’s ICT sector
■ 11.6 per cent residents either had set up a business in the past 3 years or were in the process of
■
GAPS & CHALLENGES
■ Changing labour laws particularly
■
■
related to the employment of foreign
workers is likely to impact inflow of
foreign ventures
The secondary education system still
needs to foster a spirit of
entrepreneurship
starting a venture
The Banking & Financial Services sector is the only sector to have seen an increase in positive hiring
intentions in 1Q 2014, up 7.4pp to 50 percent, its highest result since Q2 2011
Skill development
■ The National Framework for Innovation and Enterprise (NFIE) supports universities and polytechnics
■
■
to translate their research into commercial products for the market
The SMU along with other Singapore universities such as the Nanyang Technological University have
dedicated courses in entrepreneurship
SMU has also used its academic backbone for incubating 74 start-ups that has raised funding worth
S$3.1 million
Greater need for knowledge exchange
programs inviting students from other
geographies
Source: MAS website, Infocomm Development Authority of Singapore website and reports, The National Framework for Innovation and Enterprise website and reports;
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
Singapore
Business environment (1/3)
A strategic geographic location, conducive cultural and legal factors, a highly developed FS sector and significant
technology spending give Singapore a well-rounded Fintech environment
4
Business
environment
Favorable business environment driving investment in start-ups
■
■
■
■
Strong entrepreneurial culture – There is a growing ecosystem to support entrepreneurship in Singapore, which
gives it a hub position in the region. Socially too Singapore is considered to have an entrepreneurial culture,
particularly due to large percentage of migrant population
High investment potential – With no restrictions on the repatriation of profits and the import of capital, along with
the favourable operating conditions and strong diplomatic ties, Singapore offers an ideal investment
environment
Network and tech readiness – Singapore has one of the most developed network infrastructure (high speed
mobile network, under sea fibre optic infrastructure) in Asia. There are also high levels of business and
government readiness and usage of technology
Preferred location for foreign trade and investment – Contributing factors include the strategic geographic
location, connected networks with the rest of the world, strong legal system, ease in setting up new business
and attractive tax system. Is also considered to have low levels of corruption and high government efficiency
Developed financial services sector and high levels of IT spending driving Fintech innovation
■
■
■
■
Well established financial services industry - ~200 banks with a total asset size of almost US$2 trillion have operational headquarters ins Singapore. Also with
800 companies listed on the SGX, the country’s equity market is also booming. Further, with assets of S$1.4 trillion, Singapore is also a top tier insurance
and asset management location
63 percent mobile banking penetration. 71 percent Singaporeans use Intelligent Personal Agents (avatar-based web interfaces)
High levels of IT spending - The total IT spending in Singapore in 2014, is likely to exceed S$26.2 billion, up by almost 4.4 percent y-o-y
Increased spending on Fintech - ~60 percent banks and financial services companies in Singapore are increasing their spending on cyber-security. Other
critical spend areas include analytics, digital and IT transformation
Source: Worldbank databank; Singstat (Government of Singapore website), Futuregov.com, Techinasia, MAS website, Singapore Venture Capital & Private Equity Association website and reports; Infocomm Development
Authority of Singapore website and reports; Facts and Rankings about Singapore, EDB (Govt of Singapore)
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
Singapore
Business environment (2/3)
Co-working spaces and innovation labs backed by banks as well as IT vendors are emerging. These help commercialize
Fintech ideas – particularly in mobile, web and analytics
4
“
Business
environment
Citi group’s innovation lab – partnering with the industry, government universities
■
The Fintech Innovation Lab is a
highly accessible way for banks to
put their foot in the water and
experiment with start ups, which is
what really attracted me to this
program. Start ups have a level of
opportunity and innovation that a
bank would like to utilize and the
bank has massive scale, a huge
customer base and the ability to
scale out. DBS hopes to find start
ups which will help it improve the
life of its customers. We are already
working with IBM to bring Watson
into a program focused on cognitive
computing and artificial intelligence.
What innovation can we bring to
that. I hope to find start ups that can
plug into that strategy. It will be
around the customer experience
and customer touch points, less on
data and more about the actual
interaction with customers
”
Neal Cross, chief innovation officer
at DBS, Singapore, June 2014
■
■
■
Citi's Global Transaction Services (GTS) business has set up the Citi Innovation Lab in Singapore that
comprises a Client Experience Center and a Client Collaboration Center
The Innovation Lab uses web, mobile, supply chain and analytics technologies to engage Citi's institutional
clients more innovatively and to create the most effective solutions and products for them
The Innovation Lab is fully interactive and globally-linked, allowing Citi to connect with clients, global colleagues
and experts for discussions on future needs and collaboration with the bank's clients
Partners for the new lab include the National University of Singapore (NUS) and the IDA for fostering innovation
in web, analytics and mobile with an end objective of serving clients innovatively
Global tech giants drive Fintech innovation in Singapore
■
■
Accenture launched the Fintech innovation Lab in Hong Kong with a view to covering banks across the ASPAC
region, including Singapore
The Development Bank of Singapore that is already working with IBM to bring Watson on cognitive computing
and artificial intelligence, aims to leverage the Fintech lab for identifying and working with niche start-ups in the
analytics domain
“
Banks in Singapore are doing a lot more innovation than you see in US banks. The
dichotomy is that the most innovative banks are in this time zone, but not the most
innovative start-ups
Neal Cross, chief innovation officer at
DBS, Singapore, June 2014
”
Source: Citibank launches innovation lab; DBS Bank Engages IBM’s Watson to Achieve Next Generation Client Experience; Accenture’s Fintech lab launches in Asia
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
Singapore
Business environment (3/3)
In spite of a conducive business environment, recent macro-economic challenges have affected Singapore’s viability as a
Fintech hub
4
Business
environment
GAPS & CHALLENGES
Sluggish GDP growth in recent quarters
■
Singapore’s GDP, valued at US$297.9 billion in 2013, unexpectedly contracted in 2Q 2014.
–
■
On a q-o-q basis, GDP stayed nearly stagnant (0.8 percent decline), compared to a 1.6 percent gain in 1Q
2014. On a y-o-y basis, growth was 2.2 percent, against a 2.4 percent estimate
The sluggish GDP growth was largely due to a decline in electronics, primarily driven by a significant fall in
semiconductor production
–
–
The fall is also due to tighter rules for foreign labour that have pushed up costs
In addition, the services has not been able to offset the manufacturing slump
Rising inflation
■
■
The consumer price index (CPI) rose 2.7 percent in May 2014, the highest since March 2013. The core
inflation is likely to stay at 2-3 percent in 2014, with headline inflation easing out in the later parts of 2014
The Monetary Authority of Singapore (MAS) indicates that domestic cost pressures, particularly due to the tight
labour conditions are likely to remain the primary source of inflation
Appreciating currency but vulnerable to changes in US interest rates
■
■
The MAS which uses the exchange rate rather than borrowing costs as its main policy tool, is likely to let the
Singapore dollar stay on a modest and gradual appreciation path, as it seeks to curb inflation while supporting
economic growth
However, it has emerged as Asia’s most-vulnerable currency to prospects of higher US interest rates, and the
instability is likely to challenge start-ups looking out for overseas VC funding
Source: Worldbank databank; Singstat (Government of Singapore website), Futuregov.com, Techinasia, MAS website, Singapore Venture Capital & Private Equity Association website and reports; Infocomm Development
Authority of Singapore website and reports; The National Framework for Innovation and Enterprise website and reports;
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Dublin
Unlocking the potential: the Fintech opportunity for Sydney
Dublin
Introduction
Tax incentives, access to talent, and a conducive business environment are some factors adding to Ireland’s business appeal.
Macro parameters
■
■
■
■
■
#15 in ease of doing business (EIU
report, 2014)
#9 globally on the 2014 Economic
Freedom Index
#1 for the availability of skilled labor
(IMD World Competitiveness
Yearbook 2014)
US$ 217.82 billion GDP in 2013
0.39 percent inflation (CPI) in Jun
2014
State of the Fintech sector
■
■
■
NAMA, Dublin’s development
authority planning ‘Canary
Wharf’ like re-development of
the Docklands area
53 percent of Europe’s Fintech deals
represented by Ireland and UK
Majority of Dublin’s start-up
activity focused around the
Grand Canal, Ranelagh, and
Ringsend areas
Citi Innovation Lab- among the first
‘Fintech’ R&D facilities . Focuses on
banking and payment technologies
NDRC Fintech- Ireland’s first financial
technology start-up programme
launched in 2014
Source: Doing Business 2014 – World Bank; Ireland GDP – Trading Economics: Ireland Inflation – Inflation.EU; “Financial start-up accelerator Fintech launched by NDRC” – Silicon Republic; 2014 Index of Economic Freedom –
Ireland – Heritage Group
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
Dublin
Government support (1/2)
The government is pro-investment and offers tax incentives and easy immigration options to Irish as well as non-Irish entrepreneurs
Enterprise Ireland among the foremost authority offering government support and funding for fledgling start-ups in Dublin or Ireland
– plans to support ~70 start-ups each year
1
Extent of
Government
support
Government funding
§ Pre-Investment Support – Offers accelerator programmes for start-ups, wherein they receive grant funding to
cover living costs. Certain accelerator programmes also provide a funding in the form of an equity investment
for a small stake (about 6 percent) in the company.
§
Enterprise Ireland International Start-up Fund – The €10 million fund is aimed at encouraging overseas
entrepreneurs from North America, UK, Europe and Australia to set up businesses in Ireland. The fund targets
projects in sectors such as financial services, cloud computing, and Internet and offers funding between
€200,000 and €500,000
‒ Under the program, Enterprise Ireland has also sought the support of high profile successful Irish
entrepreneurs such as Dylan Collins to support the marketing of the fund overseas.
118
“
§
The number of trade
events planned by
Enterprise Ireland
globally in 2014
§
What the Irish Government is saying
very clearly today to the international
technology community gathered in
Dublin is – come and start your
company in Ireland, we are open for
business, and we will support you.
§
” “
Richard Bruton TD, Minister for Jobs,
Enterprise and Innovation, Ireland
Mentorship and Other Bespoke Services – Enterprise Ireland also provides bespoke services to aid start-ups
in getting their businesses off ground. These range from workshops, mentoring and incubator space to
introductions to potential investors and marketing support to enter overseas markets.
Priming Grants –Business start-up grant offered by the Local Enterprise Office to fund small businesses in
Dublin within their first 18 months after start up.
Competitive Start Fund - To accelerate the growth of start-up companies that have the capability to succeed
globally
“Stimulating the flow of new High Potential Start-Ups and supporting their growth are fundamental building blocks in
Enterprise Ireland’s strategy for economic growth and job creation. We want mobile entrepreneurs to locate their
businesses in Ireland and to see Enterprise Ireland as their dedicated partner.”
”
Frank Ryan, Chief Executive, Enterprise Ireland
Source: “Support for start-ups” - Enterprise Ireland website; “Bruton launches new €10million International Start-Up Fund to draw overseas entrepreneurs to Ireland” – Enterprise Ireland website; “Government support through
Enterprise Ireland”, accessed July 2014; Industry reporting; KPMG analysis
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
Dublin
Government support (2/2)
The government is pro-investment and offers tax incentives and easy immigration options to Irish as well as non-Irish entrepreneurs
1
Extent of
Government
support
Tax structure and incentives
■ Research and Development (R&D) Tax Credits – Offers a 25 percent tax credit for incremental expenditure on
R&D activities and on buildings and structures over the 2003 base year spend, although offering a full 25
percent tax credit on the first €300,000 of qualifying expenditure.
■
Employment Investment and Incentive Scheme (EII) - Provides tax relief up to 30 percent to a maximum of
€150,000 to Irish investors willing to invest in start-ups under certain eligible industries.
Visa policy & immigration
■ Start-up Entrepreneur Programme (STEP) - Allows a non-EEA nationals/ high-potential start-ups to set up
23
The number of
international
entrepreneurs
obtaining STEP
visas in 2012-13
Among low tax rates, what appeals to
many tech entrepreneurs to Ireland is
the availability of Irish officials ready to
help foreign companies set up —
usually with Ireland's Industrial
Development Agency (IDA)
business in Ireland with a minimum funding of €50,000 (was €75,000) to come and set up a business in
Ireland.
■
■
From March 2014, non- Irish entrepreneurs are also eligible for a 12-month immigration permission under this
programme in case they are attending incubators or innovation bootcamps in Ireland.
Immigrant Investor Program – Provides a range of investment options (minimum €450,000) for non-EEA
investors and their immediate family enter Ireland on multi-entry visas and remain there for up to 5 years.
GAPS & CHALLENGES
■ Low turnout for governments STEP program – Only 23 international entrepreneurs have set-up businesses in
Ireland via STEP
Source: “R&D Tax Credit Scheme, “Employment Investment and Incentive Scheme”, “Citizens Information”; “Bruton launches new €10million International Start-Up Fund to draw overseas entrepreneurs to Ireland” – Enterprise
Ireland website accessed July 2014; Industry reporting; KPMG analysis
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
Dublin
Access to Funding
Dublin’s robust network of local angel investors and VC’s promise seed funding to budding entrepreneurs – However availability of growth
funding remains a challenge
2
Access to
Funding
■
■
■
■
■
The Dublin BIC also assists
start-ups become investor
ready and guides them
through the fundraising
process
A growing and robust network of seed funds, venture capitalists, and local business angels - over €800 million in
funding is available ; €645 million under management in EI-supported SVC funds.
In October 2013, Fenergo, a Dublin based fin-tech start-up secured €4 million in new equity funding from Investec
Ventures. The start-up develops client-on boarding, enterprise compliance and data-management software solutions for
investment banks
Access to Overseas Capital – The government is pro-investment from global investors and operates a range of
schemes via which they can participate. In recent years, over 35 overseas VCs have invested in Irish start-ups or early
stage companies, attracted by the quality of the start-ups.
– Innovation Fund Ireland - Allows leading international venture capital fund managers to establish their European
headquarters in Ireland and access entrepreneurs and innovative companies.
In June 2013, the government launched a new €175 million Seed and Venture Capital Scheme aimed at providing
additional funding for high-growth businesses. The government is also targeting the private sector VCs to pitch with an
additional €525 million in funds
The Dublin Business Innovation Center actively invests in scalable early stage and high growth businesses across
sectors via the €53 million AIB Seed Capital Fund
GAPS & CHALLENGES
■ Reports suggest that entrepreneurs in Ireland are still dependent on “informal” VC funds from local business angels and
from family and friends.
■
Availability of second-stage funding remains scarce - Per Dr. Ciara Leonard, programme manager NovaUCD, a Dublin
based business incubator, availability of second stage funding is not of the same level of VC available at the seed stage.
Source: “AIB Seed Capital fund” – The Dublin BIC ; “New €175 million Government Seed and Venture Capital Scheme targets high-growth Irish companies” – Enterprise Ireland; “Fin-tech firm Fenergo nets €4m from Investec
Ventures: eyes up global growth” – Silicon Republic website, accessed July 2014; Industry reporting; KPMG analysis
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
Dublin
Access to skill and talent
A young, educated population coupled with proximity to leading European financial centers ensures ready access to skilled professionals
3
Availability of skilled labor
■ Thriving financial services and technology sectors – over 500 financial services firms employing 32,700
Skill and
Talent
professionals; technology sector employs 1,05,000 professionals across various disciplines, including ICT
■
■
– Dublin is a hotbed of financial activity in the region, alongside London – Per the Global Financial Index
(September 2013), Dublin houses over 50 percent of the world’s leading financial services firms
Ireland is ranked #1 for the availability of skilled labor, flexibility and adaptability of workforce and attitudes towards
globalization (per the IMD World Competitiveness Yearbook 2014)
Young and skilled workforce – With a median age of 35 years, Ireland has the youngest population in Europe. Over
50 percent of Irish 30 -34 year olds have a third level degree - higher than any other country in the EU.
Education and Curriculum
■ Robust higher education system – 90,000 students across Dublin’s various higher education institutions. Several
“
We selected Dublin
because it’s home to
several top colleges and
universities, offering us a
significant base from which
to cull top talent. This is one
of the primary reasons that
we based our international
headquarters here.
”
Ryan Smith, CEO, Qualtrics
■
Dublin-based universities also offer business development programs for budding entrepreneurs
Joint government/industry efforts to promote technology courses
– The ‘Smart Futures’ campaign has lead to a significant uptake of computer science courses in universities and
institutes of technology.
– Enterprise Ireland runs the Student Entrepreneur Awards, a competition that aims to spurn entrepreneurship
among students by helping them turn their entrepreneurial ideas into commercial businesses.
GAPS & CHALLENGES
■ The Global Entrepreneurship Monitor 2012 reports that aspiration to set up a new business remains low in the
country, lower than across the OECD and EU.
Source:“IDA Ireland”; “Minister Perry launches Enterprise Ireland Student Entrepreneur Awards” – Enterprise Ireland; “The Global Technology Hub – Report by the Irish Software Association”; “Six Reasons Your start-up should
be in Ireland” - Enterprise Ireland - accessed July 2014; Industry reporting; KPMG analysis
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
Dublin
Business environment
A favorable business environment, coupled with start-up support fosters innovation and entrepreneurship in Dublin
4
“
Business
environment
We’re very close to the
European and UK
markets, and at the same
time, close to the US east
coast.
Start-up friendly environment
■ Ireland is a low bureaucracy, low tax environment supportive of entrepreneurs. Low corporation tax (12.5
■
”
percent) combined with favorable double tax agreements. Tax depreciation is available to businesses on
intangible assets and intellectual property
Per the Heritage Foundation, Ireland currently has the freest economy in the entire Eurozone.
Access to accelerator and incubation programs
■ Ireland has a network of both state and privately owned start-up accelerator programmes.
‒ NDRC Fintech, Ireland’s first financial technology start-up program was launched in May 2014. The fiveweek program seeks to recruit ten early stage financial services start-ups initially
Dr John Holt, Chief
Operating Officer, Waratek
‒ Other notable technology sector focused accelerator programs in Dublin include NDRC LaunchPad and
Dublin City University’s Ryan Academy for Entrepreneurship’s Propeller Venture Accelerator Fund
GAPS & CHALLENGES
■ Being closely integrated with London,
■
most Fintech ventures look to
London’s large financial centre in
pursuit of customers, talent,
partnerships and funding.
Barring the NDRC Fintech, there is
no theme-based Fintech accelerator
for start-ups in Dublin
Other Advantages
■ Location - Well connected to most European financial and venture capital centers, notably London.
■ Access to skilled talent – With a thriving ecosystem of businesses and R&D centers across ICT, life-sciences
■
and financial services sectors, start-ups have easy access to skilled staff, experienced entrepreneurs,
investors and other support services with deep expertise.
Competitiveness – Per the latest IMD World Competitiveness Yearbook 2013, Ireland ranks in the top three
across categories such as availability of talent, investment incentives and attractiveness for foreign investors,
etc.
Source:“Financial start-up accelerator Fintech launched by NDRC” – Silicon Republic;“The Global Technology Hub – Report by the Irish Software Association”; “Six Reasons Your start-up should be in Ireland” - Enterprise
Ireland; “Entrepreneurship Propeller Venture Accelerator Fund” – Ryan Academy ; accessed July 2014; Industry reporting; KPMG analysis
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Supporting Material
Supporting Material
Unlocking the potential: the Fintech opportunity for Sydney
List of key Fintech start-ups across various global hubs
Fintech start-up Ecosystem – New York
Accelerators/Incubators Fueled Collective
Fintech start-up Ecosystem – Silicon Valley
Accelerators/Incubators Yodlee Interactive - Incubation
Thinknum
Kasisto
LMRKTS LLC
Revolution Credit
StockTwits
Standard Treasury
Xignite
Personal Capital
QuartetFS
Dwolla
Moneyworks
Fintech start-ups
Fintech start-ups Tradier
IQ
markit on demand
Zipmark
Venmo
Openfin
Lending Club
Robinhood
Sociogramics
Upside
Endurance Lending Network
VC firms FT Partners
estimize
VC firms Founder Collective
Note: The list is indicative and a detailed list of Fintech start-ups across the world can be viewed at Angel List - https://angel.co/finance-technology
Source: Industry reporting; KPMG analysis
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Supporting Material
Unlocking the potential: the Fintech opportunity for Sydney
List of key Fintech start-ups across various global hubs
Fintech start-up Ecosystem – London
Level39
Accelerators/Incubators
Fintech start-up Ecosystem – Berlin
Accelerators/Incubators GrunderTaxi
Start-up bootcamp
Mambu
Fintech Innovation Lab
Payeleven
Barclays Accelerator
iZettle
Azimo
BarPay
Liquity
Epiphyte
Barzahlen/Cash Payment
Digital Shadows
Fyber
FinGenius
twingle
Tradable
Fintech start-ups
Fintech start-ups RatePay
TransferWise
VexCash AG
Derivitec
Companisto GmbH
ClauseMatch
Zencap Deutschland GmbH
Market IQ
Open Bank Project
Open Gamma
Aire
Moni Technologies
Nutmeg
Number 26
rethink finance
Refined Insurance
Rplan
Blue Speck Financials
Funding Circle
Zopa
Note: The list is indicative and a detailed list of Fintech start-ups across the world can be viewed at Angel List - https://angel.co/finance-technology
Source: Industry reporting; KPMG analysis
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Level 39
Level 39
Level 39
Europe’s largest technology accelerator space for finance, retail and
future cities technology companies.
It is a space for early-stage businesses that have potential for highgrowth. Members are looking to create, test, market and deliver
scalable world-class financial, retail and future cities technology
products and services.
The accelerator is rare as it does not take equity in member
companies, instead Level39 helps members to grow into its ‘High
Growth Space’, a 15000 square-foot area for larger companies
situated on the 42nd floor of the same building.
1
Unlocking the potential: the Fintech opportunity for Sydney
2
■ Level39 plays host to innovation and accelerator programmes – these
■
■
■
The concept
■ Level39 is Europe’s largest accelerator space for technology businesses
innovating in the financial services sector
■ Occupying the entire 39th floor of the iconic One Canada Square
■
building, and established by Canary Wharf Group plc, Level39 was
opened on 18th March 2013 by Boris Johnson, Mayor of London
The space has become an important part of Tech City- having hosted
over 200 events, including hackathons, skunkworks and demo-days.
By the time Level39 completed one year, it had worked with over 80 high
growth potential technology companies after receiving 682 applications for
membership. The 44,000 square feet space facility at One Canada Square
welcomed over 30,000 visitors and convened 182 hours of mentoring
Facilities
are short programmes that aim to boost a young company’s growth over
a concentrated period of time. Due to Level39’s partnership with Pivotal
Innovations, innovation programmes can be created and crafted inhouse.
Members of Level39 can work from drop-in space, hot-desks, fixeddesks and private office spaces.
Set in the middle of one of the world’s premier business and shopping
districts, Level39 is well connected to Canary Wharf’s working
population of 100,000 and over 240 cafes, restaurants, bars and shops.
Within six months of launch, Level39 opened the High Growth Space on
the 42nd floor of One Canada Square. The High Growth Space is a
further 15,000 square feet of office space that is designed to suit
graduates of Level39 and larger technology companies, with teams
between 8-100.
3
Add-ons
■ Space39 is a 220 seat event space that hosts regular industry events
and boasts some of London’s best views.
■ Level39’s Sandboxes are think-spaces that welcome tech experimenters
■
and policy makers. Software engineers from large-organisations can
refine, test and showcase transformative technologies in a safe, ringfenced environment.
The ‘FutureMinster’ Sandbox regularly plays host to politicians and
think-tanks.
Source: Company website, General Internet Search, KPMG analysis
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Level 39
Unlocking the potential: the Fintech opportunity for Sydney
Level 39 + Snapshot - Members
■ ACE Consensus is a digital platform that provides very high
quality information on market expectations for listed
companies.
■ Advanced Merchant Payments (U.K.) Ltd. (AMP) is a
financial technology company which enables banks and
other institutional lenders to provide loans to micro-smallmedium sized enterprises (MSMEs), with reference to the
borrower’s electronically verifiable cash flow, such as credit
card payment activity, and other available data points.
■ Apply Financial serves banks and corporates across the
globe with their innovative cloud based real-time. Payments
Validation solutions.
■ Digital Reasoning enables the automated understanding of
human communication. Digital Reasoning’s award-winning
machine learning platform, Synthesys, identifies threats,
risks and opportunities by transforming information into a
private Knowledge Graph.
■ Asset Mapping has platforms which gather data from the
software packages used to design, install, and operate city
wide systems. The company combines real time information
such as CCTV video feeds, air conditioning date and live
readouts of Energy meters to provide meaningful insights to
stakeholders and engineers.
■ Fingenius is a global supplier of Artificial Intelligence (AI) and
Natural Language Processing (NLP) solutions for the finance
industry. Their proprietary technology enables financial
organisations to answer questions from customers and
employees instantly without employing help desks or call
centres.
■ Crowd funding Magic works on platforms which act as valuable
resources to colleges and universities. The company aims to
organise entrepreneurial students and start-ups on campus and
get them connected to mentors, advisers and resources such
that they have a support system.
■ Derivitec is a UK ISV focusing on cloud based analytics for the
financial industry. It is currently a team of two ex-Goldman
quants and one ex-Schroders IT professional. The company has
been in business since December 2011 and are just entering
early adoption testing with a selection of users from the hedge
fund and investment management space.
■ Big Noodle creates multi-channel solutions in a customer driven
world. The company builds and implements solutions allowing
banks and enterprises to predict customer behaviour and
engage them in conversation in their preferred way.
■ Cayman Atlantic Investment Management is a boutique
investment management company based in the Cayman
Islands.
■ Cloudsoft provides enterprises with software solution related to
modelling, monitoring and management of applications,
enabling application migration, accelerating the development of
cloud first applications; and delivering policy-based application
elasticity, scalability and portability.
■ Ringpay is a payments technology company
which, through its
platform and mobile apps, provide a strategic and versatile
communication channel, from brands to their customers,
enabling one-to-one relationships and conversation possibilities.
Source: Company website, General Internet Search, KPMG analysis
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Level 39
Unlocking the potential: the Fintech opportunity for Sydney
Level 39 + Facts and figures
Source: Company website
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Level 39
Unlocking the potential: the Fintech opportunity for Sydney
Level 39 + Fueled Collective Partnership
The friendship agreement unites the world's Fintech capitals
■ On 27th March 2014, Eric Van der Kleij, Head of Level39, launched Day 4 of Fintech Week by announcing a new partnership
+
■
with New York-based Fueled Collective.
The move was designed to open a two-way door into the transatlantic market for Fintech start-ups and high growth companies.
The friendship Agreement with New York's Fueled Collective enables members of both incubators to use each other's space
when doing transatlantic business.
“
During Level39′s first year as Europe’s
leading centre for Fintech innovation, we
have learnt that our companies have the
potential to transform the financial services
sector on a global scale. As we enter our
second year, we will focus on shining a light
on the Fintech sector, and better connecting
our companies internationally. Fintech Week
is the ideal platform for Level39 to announce
its new partnership agreement with the
Fueled Collective of New York. This gives our
Fintech members an important transatlantic
gateway through which to expand their
businesses into the global financial
community, and offers US startups a route
into Europe.
”
“
New York and London are two of the world’s
leading cities for tech startups, and this is just
the first step in a partnership that we hope
can be an example to other accelerator
spaces in the US and UK, and around the
world. The digital economy is one of the
fastest growing spheres of the market – and
we need to nurture this growth to stay ahead
of the curve
”
- Rameet Chawla
Founder – Fueled Collective
- Eric Van der Kleij
Founder – Level39
Source: Company website, General Internet Search, KPMG analysis
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Definitions and
references
Definition
Unlocking the potential: the Fintech opportunity for Sydney
What is it?
Disruptive innovation
■ Disruptive innovation specifically refers to technologies that “disrupt” current market norms and processes and are typically designed for niche
■
What is required?
■
markets before being adapted by a market as a whole.
A famous example is the personal computer. Originally designed for scientists who required on demand data processors (as opposed to punch hole
main frames) PC’s became steadily adapted by the market as a whole when its utility for information storage and processing (initially a by-product of
the invention) were found to have numerous use in other areas such as financial services, education and manufacturing.
Unlike bolt-on innovations which add productivity to current technologies (such as a personal computer with a faster processor), disruptive
technologies are “game changers” in that they revolutionise an industry value chain.
Venture/Seed Capital
■ Sydney is the lead venture capital centre of Australia. The internet and subsequent innovations such as crowd funding has also catalysed this as
Australian start ups are now able to access capital globally. Tapping into local capital is just as important and requires mitigation of information
asymmetry amongst un-deployed capital in Australia. Apple computer for example received nearly US$1m in todays money.
Disruptors
■ Disruptive technologies are the capstone of innovation. They require an entrepreneur to form a contrarian view on the status quo. Significant R&D is
required as usually there is no foundation to build upon or precedent to inspire.
■ Human capital is extremely important. Typically disruptors have come from two branches: university students and seasoned executives.
■ Mark Zuckerberg, Sergey Brin and Larry page were star university students who had the capacity to experiment with new technologies that led them to
“stumble on” Facebook and Google. Marc Benioff on the other hand was a successful executive at Oracle when he realised that CRM can be done
better in the Cloud and founded Salesforce.com.
■ These entrepreneurs flourish in a diverse learning environment, typically surrounded by educational institutions that promote experimentation and
research through well funded programs. Silicon Valley for example is in proximity to Stanford, UCLA and Berkeley. The Stanford Graduate School of
Business is tailored towards the start up space and graduates many technology executives and entrepreneurs.
Safe To Fail
■ Whilst ‘failing quickly’ is ideal, some technologies take years to develop. From both the perspective of experienced and inexperienced entrepreneurs,
this attempt cannot be made in vain.
■ In the case of Salesforce.com’s Marc Benioff, working at Oracle as an executive meant that he could at will abandon his start-up and move into
another company in Silicon Valley where there are nearly 400,000 jobs in the technology sector compared to 60,000 in Sydney.
■ This is a major challenge of financial technology in Australia in particular as financial technology executives in Australia operate in a niche market due
to FI consolidation. Motivating them to leave their secure jobs to attempt an idea is a hurdle that must be overcome.
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Definition
Unlocking the potential: the Fintech opportunity for Sydney
What is it?
Collaboration and Business improvement
■ Collaboration is a vital catalyst for disruption. From the side of the established firms, shifting to more innovative business models and process is
■
■
■
not a choice, rather an evolution. It is only a matter of time before firms with embedded and inefficient processes begin to fail in light of disruptive
innovation. The decline of car manufacturing in Australia and the USA is a notable example of this. This ‘survival of the fittest’ characteristic of
the market makes a play into technology a defensive one as much as it is aggressive.
Business improvement occurs when established enterprises implement new technologies. Large legacy organisations find this task far more
challenging than creating the technology.
Collaboration occurs when established organisations within the market begin to lift the veil on their process and operations in order to better
guide the disruptor’s objective. This commonly occurs when the large established firm ventures into the innovation market. The venture can take
the form of a cash investments, provision of resources or release of trade secrets. Some companies such as Optus and Westpac go as far as to
establish incubators and venture capital firms in an attempt to gain first mover advantage.
Business improvement is when the disruptive technology under the guides of collaboration is ready for implementation.
What is required?
Co-location
■ In order to facilitate collaboration from established firms, the location of start up technologies within the finance sector must be near to the firms
they wish to disrupt. Whilst the modern age allows for decentralised working environment, relationships are forged with direct contact. Level39, a
successful Fintech organisation in London is located in Canary Wharf within walking distance to financial institutions.
Economic catalysts
■ Events requiring massive leaps in operational efficiency drive technology investment as firms seek more cost effective ways of doing things. The
Global Financial Crisis created a push by global financial institutions to explore technology as an effective means of cost cutting and enhancing
their productivity.
Willing to take on risk
■ Both collaboration and business improvement have significant risks. For Australia’s largest banks a cash investment in an incubator or start up is
miniscule in context of their profits. Far more riskier is implementing new technologies. This is particularly true for banks with outdated legacy
systems that requires significant expenditure to migrate to newer technologies, e.g. CBA’s core system modernisation cost an estimated $1.5
billion.
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Definition
Unlocking the potential: the Fintech opportunity for Sydney
What is required?
What is it?
Incubators and Accelerators
Incubators
Working space
■ Incubators provide a space for companies to set up in such as
office space
■ Collaborative working environments facilitate idea exchange
between various entrepreneurs
■ Incubators provide modern research equipment and licensing
■ Firms typically exist longer within an incubator than they do an
accelerator.
Mentorship
■ Incubators do not necessarily provide mentorship. Instead
they provide fundamental business support.
■ Typically incubators insert management into start-ups to guide
it through a go-to-market or funding process.
Funding
■ An incubator brings in an external management team to
manage an idea that was developed internally. This is usually
reserved for the ideas with the greatest promise and highest
capital intensity. As such incubators typically take a much
larger piece of the pie when compared to accelerators.
International examples
■ Level39 (London)
Local examples
■ Venture Incubator Space is a UNSW project available to
successful applicants for up to 12 months.
Accelerators
Working space
■ Accelerators may or may not provide space, sometimes the space is
rented out whilst other times they are decentralised with entrepreneurs
working from home.
■ Accelerators typically have times from which the start-ups enter &
“graduate”
Mentorship
■ Accelerators provide strong mentoring programs. Mentors stem from CLevel executives to go-to-market specialists from management consulting.
■ Frequently this is provided for free however is not a necessary.
Funding
■ An accelerator takes single digit chunks of equity in externally developed
ideas in return for small amounts of capital and mentorship
International examples
■ The Barclays Accelerator, powered by Techstars, is a three month
intensive start-up programme, with US$20,000 seed funding.
■ Wells Fargo provides small equity investments (between US$50,000 to
$500,000) and six months of mentoring for young companies.
Local examples
■ AWI Ventures Accelerator is a Fintech accelerator program and runs for 6
months with 4-6 teams offering A$50,000 cash in return for a minority
(10%) equity share.
■ PushStart is a Sydney based accelerator offering A$20,000 in cash, office
space and services for 8% equity.
■ Founder Institute is a four-month idea stage accelerator program and
global launch network.
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
Referenced sources and additional material
List of referenced sources (click on the embedded link)
KPMG Global Services
The Fintech Startup Ecosystem
List of Sources/References
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
Unlocking the potential: the Fintech opportunity for Sydney
Stakeholders interviewed as part of the project
Stakeholders consulted
Organisation
Ben Heap and Toby Heap
Australasian Wealth Investment and AWI Ventures
Danny Gilligan and Simon Cant
Reinventure
Andrew Rothwell
Tyro Payments
Asher Tan
Coinjar
Alvin Singh and Bosco Tan
Pocketbook
Mike Wood
Westpac
Neil Helm
OzForex
Michael Lee
Flongle
Remi Bourrette and Christophe Chazot
HSBC (UK)
David Sayer and Tim Kay
KPMG UK
Richard Hinton and Arthur Broadwater
KPMG USA
Eileen Toledano and Nir Donitza
KPMG Israel
Tim Dümichen
KPMG Germany
James McKeogh
KPMG Hong Kong
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International). Liability limited by a scheme approved under Professional Standards Legislation.
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© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms
affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG
International).
Liability limited by a scheme approved under Professional Standards Legislation.
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