Stone and Chalk has used its submission to the Select Committee on Financial Technology and Regulatory Technology and its probe into the opportunities the two sectors present to Australia to warn about the urgent need for a strategy to be developed to better support the startup fintech sector.
"If an effective, comprehensive strategy to encourage technological innovation and the ability to support emerging companies is not implemented as a matter of urgency, Australia is at risk of losing the regional race in positioning itself as a market of choice for fintech and regtech resources -- natural, human and financial," the submission said.
The Sydney-based fintech accelerator described that to date, the Australian fintech sector has "suffered from a bipartisan approach marked by partial analysis, ad hoc solutions, and a failure to thoroughly invigilate the successful strategies other countries have developed".
The submission also criticised how while there is a perception the government understands the fintech and regtech sectors, the government's slow response to policy reforms suggest otherwise.
But the federal government was not only one in the firing line. Stone and Chalk also hit out at large corporates, labelling them as "net destroyers" of jobs because of their growing adoption of robotic automation, machine learning, and artificial intelligence.
As part of its submission, Stone and Chalk also put forward numerous recommendations to reduce the barrier of adopting new technologies, and create an environment that promotes growth in the fintech and regtech sectors.
The recommendations were divided into five key areas: capital and funding; taxation policy; skills and talent; culture, collaboration, and partnership; and regulation.
While access to venture capital funds has improved, according to Stone and Chalk, a "critical investment gap" for seed funding remains, which is further exacerbated by the lack of investors with knowledge about technology startups.
The submission recommended that greater incentives for individual taxpayers -- retailer and wholesale -- to invest in Australian startups and scaleups be delivered, including 100% capital gains tax relief for investors and 100% tax loss offset up to a threshold limit of AU$400,000.
Stone and Chalk also wants to see government allocate a "significant proportion" of funding from existing programs to create an Early Stage Co-Investment Fund, instead of "contracting out" responsibility and funding for commercialisation to Cooperative Research Centres and Australian Research Council industry grants.
See also: Why Westpac is making 'frenemies' with fintechs (TechRepublic)
To address the lack of willingness or ability by organisations to procure services from fintech and regtech companies, which Stone and Chalk claimed is the "single biggest barrier to entry", it suggested that existing R&D tax incentive arrangements need to change.
"Not only can properly updating the R&D incentive scheme support the forward funding of fintechs, regtechs and early stage technology companies more broadly, but they could also be used to incentivise commercial collaboration," the submission said.
Other recommendations included overhauling the existing skilled migration and entrepreneur visas by removing any caps on the annual entry numbers, simplifying the application process that does not require costly migration specialists, and capping the application fee for startups at AU$1,000.
On the point of regulation, Stone and Chalk recommended for Australia to look to the United Kingdom to how a "right" regulatory system can attract fintech ventures and investment.
"Australia can learn from the lessons of the UK, particularly from the development of tailored policies and regulatory environments that take growth rather than control as its first principle towards producing dramatic sectorial growth in the emerging Fintech sector," the submission said.
"This stands in stark contrast to Australia, where an emerging sector is effectively being curtailed by a regulatory approval regime originally designed to oversee larger, more mature financial institutions."
In a separate submission, Fintech Australia agreed that the United Kingdom is a "good benchmark" for Australia's fintech and regtech sectors.
"Its fintech industry is well recognised for providing long-term value to the UK -- economically, culturally and socially. There is no similar recognition in the wider Australian political or social context even though the value offered by fintech for Australia's future is no less true here than it is in the UK … Continued effort across all parts of the fintech ecosystem in Australia -- government, incumbents and fintechs themselves -- is required if the industry is to realise its full potential," the member-driven organisation wrote.
Meanwhile, on the topic of R&D tax incentive, Fintech Australia wants to see the federal government continue to support the scheme but with an increased budget allocation, as well as consider how the scheme could be simplified, and greater clarity around when and how the R&D tax incentive applies to software development in relation to fintech businesses.
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