Senate Fintech Inquiry – Initial Thoughts

The second issues paper published by the Australian Senate’s Select Committee on Financial Technology and Regulatory Technology is showing signs of progress in understanding the issues, blockers and opportunities for Australian fintech companies, however is light in the following critical areas:

Access to Talent

Australia’s visa system for entrepreneurial talent, founding team members and next 50 to 500 employees is completely broken. It needs a complete overhaul from the ground-up for the technology sector and requires (at a minimum):

  1. Rapid entry – guaranteed visa approval and issuance within 7 business days or less. The government-aspect of the process should focus on attributes other than employee suitability, whether or not a local search has been undertaken, the candidate’s education and the pay level but instead should focus on auditing the sponsor’s process – verifying background checks, criminal history and health checkups provided by the sponsor on behalf of the visa candidate as well as the available sponsoring quota for that sponsor.
  2. Trust in sponsors – Australian high-potential companies need to be able to become sponsors quickly and easily, and once approved as sponsors, exercise their own discretion in extending nominations to visa candidates and take financial responsibility for those that they sponsor. Sponsors need to be able to get talent into Australia relatively autonomously. You shouldn’t need to convince a government department with no context that you need a new role in your business and why you want to hire a specific person from a top tier tech company from overseas. It is madness.
  3. Abandonment of role classifications – these role classifiers are so dated and somehow are getting further away from the actual labour market over time. Either get rid of them, or zoom them out far enough so they make sense e.g. Engineer, Manager, Designer, Tester, Sales.
  4. Easy come, easy go – if you are no longer sponsored, or violate the rules, you’re out in 30 days.

Access to Capital via Australian public markets

The ASX is relatively self-aware of its own issues in supporting startups and fintech, and I’ve had many conversations with key ASX people about this and I feel comfortable that the exchange is on the right track.

The issues with access to capital for startups via the ASX in Australia is the opaque and systemically conflicted money supply-chain that strangles the ASX. The mid-market investment banking and brokerage industry work together as market-making gatekeepers deciding which companies receive institutional funding and retail distribution and which ones do not. This has far reaching consequences for the innovation ecosystem, including blocking capital raisings for companies that might disrupt large investment positions of favoured clients as well as the customary issues with market-makers such as market failure on the fair pricing and valuation of new companies.

Foreign Investment

FIRB must adopt an unapologetically “Australia first” national interest overlay for all foreign investors. Australia needs to stop being naïve to the sophistication and long-term planning of its key trading partners.

All of the contractual and statutory powers vested to foreign interests must be subject to this new overlay. Australian bodies corporate should be protected in the same way as Australian persons. Given debt is generally more powerful over a business than equity, it is unclear why debt is treated differently and so leniently by FIRB.

FIRB’s powers after financing should be widened to ensure the persisting compliance of the financing to Australia’s national interest. Post investment conduct creates as much exposure for the Australian economy as the investment itself. For example, FIRB should be notified and provided evidence in writing before any foreign creditor action like the appointment of liquidators and receivers to ensure it is being performed for a commercial purpose and not political interference.

FIRB’s role in the innovation sector needs careful thought to balance the objectives of speed and access to foreign capital with the growing importance of protecting Australia’s precious innovation, resources and capital.

I had the benefit of contributing to the first part of the Senate’s Inquiry and am pleased to see it evolving into a holistic “reset” on the domestic innovation settings to help support Australia’s future.

– More to follow