Becoming a bank in Australia just got easier

This week saw the release of the Australian Government’s 2017-2018 Budget.

And looking at the number of pro-fintech initiatives, it would seem the increased scrutiny from the public, opposition and industry watchdogs on the banking sector is starting to be felt.

And while many extremists may argue the proposed initiatives don’t go far enough in encouraging competition, it is a positive signal to startups looking to compete in the space.

For starters, the holy grail of fintech – becoming a bank – is slated to get a whole lot easier thanks to a relaxation in ownership and capital requirements.

Following in the footsteps of the UK, the budget proposes authorised deposit taking institutions (ADIs) with less than $50M in capital now be able to call themselves a bank, benefiting from the reputational halo this word endows.

The 15 percent ownership cap for any one shareholder will also be relaxed. Challenger banks who had previously looked to meet this requirement by listing may now find not going public far more appealing.

Will more established challenger banks passport into the market? Quite possibly. The announcement surely has some revisiting their APAC strategies.

In other news pertinent to SMEs, comprehensive credit reporting will be mandated by the close of the year – voluntary participation has been rather disastrous as a whole. And while many focus on the positives of this, one should not forget negative reporting also falls under ‘comprehensive’. There is still a broad question yet to be answered as to whether more information on credit applicants – especially small businesses – increases or decreases access to credit.

As with anything, the real magic is in what you do with the data you have, and whether the models you are using to price risk match the reality of that risk.

Finally, as if they needed more headaches, big banks in Australia will now be subject to a $6.2B levy, which will go towards supporting a disability insurance scheme. With the opposition pledging support, it seems likely to pass.

For a full break down on all the budget’s fintech measures, Fintech Australia has produced a handy fact sheet. Among those described above, the government is proposing an expansion of the regulatory sandbox, the introduction of open financial data come 2018, an equity crowd funding expansion and reforms on digital currency.

Daily Fintech Advisers provides strategic consulting to organizations with business and investment interests in Fintech. Jessica Ellerm is a thought leader specializing in Small Business.

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