Why an inflexible retirement awaits those in the ‘flexible’ gig economy

In Australia, mandatory payments by an employer of 9.5 percent of a staff member’s salary into a retirement fund has become so accepted by the vast majority of Australian workers, that many pay the scheme cursory, if any real attention at all. As a result of this steady flow of payments into the industry’s 500 or so funds, by the end of 2016, regulatory bodies claimed $2.2 trillion in superannuation assets had been accumulated, up 7.4 percent since the previous year.

Today the superannuation balance for those currently retiring is estimated to be $292,500 for men and $138,150 for women. While still considered inadequate for a comfortable retirement, as the system continues to mature then those retiring decades from today are expected to see their average balance lift considerably.

Or will they? They changing nature of work and the rise of the gig economy has many worried that the resulting shift away from permanent employment to contracting and freelancing arrangements is putting significant pressure on this stalwart of Australia’s retirement framework.

While a small number of people engage in the gig economy full time today, the number is growing. In 2015 the Grattan Institute estimated around 80,000 Australians found short-term employment via online peer-to-peer platforms. And while this number is still relatively inconsequential, the freelance economy is booming. According to a study by Upwork, an estimated 4.1 million Australians, roughly one third of the workforce, have done freelance work in the past year.

And while gig economy workers may complement their weekend odd-jobs with a 9-5 during the week, freelancers tend to rely more heavily on contract work. They are also responsible for making their own superannuation contributions – something that tends to come last in the list of financial priorities. And while some freelancers may be in a position to negotiate super contributions, for many this is not the case.

Freelancers, for the most part, can be considered self employed. And superannuation stats for self-employed workers are dire, with roughly half the amount available at retirement compared to corporate employees. The same fate seems to be awaiting those in the growing gig economy.

Regulators and industry bodies are taking note. Reports of exploitation of workers in this space are on the rise, with companies like Deliveroo and Uber under attack in a number of jurisdictions for creating contract like employment structures that remove the need for benefits, like superannuation, to be paid. With more and more younger workers moving into these ‘flexible’ roles, and with more and more traditional businesses copying gig economy models, the long term effect on retirement savings is shaping up to be profound.

These macro-economic forces present opportunities for financial product providers to solve real problems. Default retirement planning – which by and large has been successful in its current state in Australia for a workforce made up of permanent employees – will need to undergo a radical transformation. The good news is governments are starting to take notice of the changing workforce dynamics, and the impact this will have on their future budgets. As a fintech startup, being ahead of this curve ever so slightly and leveraging this national interest approach could be a powerful position to occupy. In the US, Intuit, who forecast 7.6 million American workers will operate in the on-demand economy by 2020, has done exactly this by anticipating this shift and adjusting its product to suit. There is no question other financial startups could ride this wave as well.

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.

Goldfields Money makes Australian BaaS play with Singapore’s Instarem

Listed Australian deposit taking institution Goldfields Money (ASX:GMY) looks to be making good on its intention to become a leading player in the digital banking product distribution and BaaS market in Australia, announcing last week that it had signed an MoU with Singapore headquartered remittance fintech Instarem.

Goldfields will be using a Temenos off the shelf core banking system as part of its refreshed BaaS offering.

What is interesting about the MoU is the intent to move beyond remittance towards a broader banking play for cross-border SMEs and products orientated towards visa holders visiting or living in Australia.

Given Instarem’s origin, there is no doubt the company is looking to capitalise on the ever-increasing influx of high net-worth immigrants from the Asia-Pacific region into Australia, many of whom may not be getting the best deal or banking experience from a local Australian provider. If you happen to be a migrant yourself, you’ll probably empathise with just how cumbersome and difficult it is to manage multiple banking and financial arrangements between two jurisdictions.

The two companies should have a healthy market ready to capitalise on. According to the Australian Bureau of Statistics, over the last 10 years the proportion of the Australian population born in China alone has increased from 1.2% to 2.2%, coming in just behind New Zealanders and British immigrants. Those born in India currently make up 1.9% of the population, while citizens from the Philippines, Vietnam and Malaysia collectively add up to further 2.7%.

The outflow of wealth from China, a large portion of which is making its way into the local Australian property market in Melbourne and Sydney via these immigrants, is also increasing the demand for financing solutions for those that have a mix of local and foreign income. This demand can only have increased since major retail banks tightened their requirements for offshore buyers, some refusing loan applications based solely on foreign income altogether. Recent reports suggest PE and debt firms may be looking to plug this gap. Instarem and Goldfields may or may not have aspirations here as well.

Migration isn’t going away. And the degree to which an individual’s assets are spread across countries is also on the increase thanks to globalization. Despite the protestations of certain populist politicians, it is hard to see cross-border trade regressing – economies just won’t survive under protectionism. All of which makes partnerships like these, those that remove frictions and enable business, all the more interesting to watch.

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.

How fintech startups are helping SMEs choose who they do business with

Deciding to supply services and goods to another business is probably one of the most difficult decisions for a small business owner. Without a prior relationship, it can be difficult to assess if a new supplier will pay on time.

And, as a recent survey from Xero has revealed, if they do get it wrong, it can have serious knock-on consequences.

According to Xero, 38 percent of small business owners indicate late payments cause them to delay payments to their suppliers, while 15 percent claim this often sees them delaying wage payments to staff, along with other benefits.

The stats on the effect of late or delayed payments on business longevity are also pretty dire.

62 percent of businesses would not survive more than three months if all invoices went unpaid, while nearly 25 percent wouldn’t last a month.

So it makes sense that finding ways to avoid late payment heartache before it becomes a problem is a good first step. Asking for references seems outdated in a data and API rich landscape, so therefore a data driven approach is exactly how a number of fintech startups and partnerships are looking to solve this problem.

Xero’s Live Contacts, a partnership with the local arm of credit bureau Equifax (formerly Veda) is one such data driven solution. As part of a paid-up Xero subscription, businesses can now see a credit risk indicator against a contact in their database, helping them to better assess whether to do business or not, or even risk adjust payment terms.

According to Equifax’s website the indicator represents an aggregation of data from multiple sources, including commercial credit accounts and other debts, public record information, court judgements and writs, directorship details, proprietorship details, bankruptcies, debt agreements and personal insolvency.

At the other end of the data spectrum, CreditMonk in India allows businesses to add a review of a creditor’s payment behaviour via its platform. Similar to other review based sites, a company’s profile page displays star ratings for various payment behaviour attributes and softer elements like ability to contact senior management, or the company’s ethics.


Obviously such databases are only useful when they are data rich – which will be the key focus for the business with its initial free offering. An article on Bloomberg Quint states the company is yet to decide how to monetise its platform, although it’s not hard to see how various revenue streams could open up in the future, should they build a robust database of reviews.

Quality control will also be an interesting one. How the platform moderates businesses solely out to skewer their competitors will be interesting. But a combination of a Xero Live Contacts and a Credit Monk like service would be interesting. Maybe we’ll see exactly that in the future. However if you know of someone doing it now, share your research in the comments below!

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.

Households to ditch the spreadsheet for the cloud

Most of us like to divide our lives squarely in two – home and work. But there is a growing number of financial consultants that are inclined to have you start treating your downtime more like your office time, so as to better manage your household budget and finances.

Thankfully that doesn’t extend to workplace jargon – well not yet anyway. Just imagine if when you asked your partner if they could pick up milk on the way home they questioned if that was on the grocery roadmap. Or if, when querying where your teenage daughter was going on a Saturday night, she asked you to park that question for an offline conversation the next day.

All jokes aside, there is merit in getting more business minded with our household budgeting efforts – we do tend to spend up large. According to the last Australian Bureau of Statistics Household Expenditure Survey, the average Australian household spends around $69,166 on general household living costs. Out of a total of pool of $642 billion spent by households, this includes:

  • $78.4 billion a year on cars versus $2.2 billion a year on public transport
  • $8.0 billion a year on beauty versus $2.0 billion a year on brains
  • $14.1 billion a year on alcohol versus $1.1 billion a year on tea and coffee

So in a world of cloud enabled accounting systems and financial API connectors, it should come as no surprise that cloud budgeting startups like myprosperity are now looking to help households ditch the spreadsheets in favour of their platform. Using real time data, in much the same way their accounting predecessors have done, they are seeking to empower homeowners to make better and more timely decisions about how to run their households.

The wind is clearly in their sails. Just this week the Australian based startup announced it had hired the former Australian CEO of Xero, Chris Ridd as it’s new chief executive. Also backing the platform is the well-respected MYOB founder Craig Winkler.

The company has raised an additional $2.5 million for its household financial data aggregation portal, pulling in everything from bank feeds to superannuation, credit card data and insurance policies for that, dare I say it, single household view. Seems it’s hard to get away from the jargon after all.

According to Business Insider, the company has 10,000 users and $15 billion of assets running through its platform, with Ridd quoted as indicating the company has plans to move into selected overseas markets.

I certainly think there is demand for this sort of product. A while back I actually considered using Xero myself to achieve a similar outcome, but with the platform catering to businesses, it didn’t quite fit what I was after, without considerable workarounds. But this however may just fit the bill. My household ones, at least.

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.

Own the heart and you’ll fix for the head in SME financial decision making

Recently I came across an interesting piece of research out of Mexico that sought to uncover the impact of financial decisions and strategy on small business competitiveness.

While the authors acknowledge weaknesses around financial data collection – a large degree of raw inputs are qualitative and survey based – the results tend to skew towards a conclusion most of us would readily come by anecdotally;

  • Companies that efficiently manage their short-term assets and liabilities are more competitive (when competitiveness is measured as time in market)
  • SMEs show little to no alignment between business strategies and financial decision making

Financial decision-making is a wide-ranging topic, but can generally be considered as being comprised of three core building blocks: working capital needs, funding options and then investment decisions. Helping a business owner make better financial decisions, especially around working capital, should be the primary concern, as according to the study (and general business wisdom) this is what leads to operational longevity.

We all know small business owners typically lack the sophisticated financial analysis techniques commonplace in larger businesses that support good decision-making on working capital allocation. Which means up until now, the obvious technology led approach to solve for this has been to somehow distil these techniques into accounting platform add-ons and apps, which automate cash flow predictions and forecasting.

And while they’re good at shining a light on the business’s cash flow problem, most tools lack the confidence and intelligence to equip them with the teeth required to make a recommendation on what decision to make next. They’re like a bridge you can only cross if you’re willing to pay an additional advisory toll.

Many of these platforms still require heavy lifting on the part of the business owner from a ‘background theory’ perspective. Which to me means there is still something relatively inelegant from a product perspective when it comes to solving for improved decision-making using these crash-course models.

Instead, could we achieve the same outcome – better decisions – by solving for other decision-making weaknesses that are indirectly related? Theory is only one part of making great decisions. Emotions play a large role as well.

A growing body of research in the behavioural sciences field suggests a number of emotional states negatively affect our decision-making ability. Financial decisions are not exclusively impacted, but they do have far reaching ramifications if we get them wrong.

So if we were to attack poor financial decision making at a micro level, by helping to create positive decision making emotional states, could we impact macro level decisions like the ones mentioned earlier? Almost certainly. Behavioural science tactics could be the path of least resistance to creating systemic changes to an SMEs financial decision making patterns.

Whether we like to admit it or not, as humans we are programmable. Not only do we have an inbuilt survival manual hard coded into our DNA, but our behaviour can also be modified by external nudges. It can be adapted to the extent that our core programming can be significantly changed – even late into our adult life. Emerging research into adult brain plasticity is proving old dogs can in fact learn new tricks.

I don’t have an answer (yet) as to how this could be realised in practical terms for SMEs, but it’s heartening to see a number of startups in the personal finance space starting to take a behavioural framework approach to core product design. The Common Cents Lab at the Center for Advance Hindsight lists a number that are worth checking out.

Most of us are familiar with our heart interrupting our head when it comes to making decisions in our personal lives. So why would it be any different in business? To put it another way, ‘Most of our mistakes, the big ones at least, are the result of allowing emotion to overrule logic. We knew the right choice but didn’t obey.’ Fix for that and maybe you’ll solve for the far bigger and messier problem in the end anyway. I’m all for the fastest and simplest way to achieve the best outcome, and, something tells me small business owners are as well.

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.

Interview with Peter Vessenes, Founder & CEO of ProfitSee

Fiscal management is one of those phrases which, as someone who does not have formal financial training, I would have once found myself nodding my head to in conversation without really understanding what it entailed. I feel OK about that, because I’m sure if I had of said the phrase ‘single-electron transfer living radical polymerisation’, the topic of my honours thesis, most people would have done the same. So quid pro quo.

However last year I did get interested in fiscal management after meeting Peter Vessenes, founder and CEO of ProfitSee, at XeroCon in Brisbane. Peter, you see, is on a mission to make fiscal management accessible and understandable to small enterprises. Using smart algorithms and AI, he and the ProfitSee team want to serve up financial insights that help drive better decision making. The types of insights once only accessible to Fortune 100 companies.

And he certainly has the pedigree to play in the space. Since 1983 he’s worked as a turn-around specialist, assisting corporates and multi-nationals with their fiscal management. Alongside that he’s also contributed to policy development in Washington and somehow managed to learn to code and author a number of books along the way.

With ProfitSee having expanded into over 6 markets globally, the big accounting firms are now coming knocking on Peter’s door in their desire to find value and returns in the SME advisory space. ProfitSee’s white label approach makes it a potential weapon in these sorts of strategies.

But the real magic is hearing Peter talk about what he does and, more importantly, why he does it. His global perspective on the SME advisory space is something no aspiring B2B fintech startup or investor should miss. So when he was in town this week, I made sure to lock him down for an interview, which you can listen to below.

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.

Financial wellness in the workplace

Workplace wellness is a booming business, especially at the corporate end of town. In Australia, property groups like Dexus and CBRE are embracing wellness initiatives to differentiate themselves in the office leasing space. Not only are they incorporating wellness principles into their building standards (WELL by Delos being one example), a friend of mine in asset management now tells me property companies are developing wellness platforms and portals for tenants, allowing building users to tap into a network of on-site yoga instructors, nutrition experts and chiropractors, as they seek to help their tenants create healthier and more productive workforces.

Of course, many of us know that wellness in the workplace extends beyond the purely physical. Along with mental health, financial wellness is an area that is now increasingly gaining the attention of employers. According to a study published by AMP last year, 1 in 4 Australian workers experiences financial stress, with a lack of confidence in their ability to make ends meet. Business owners and managers are under no illusion that this type of stress has an impact on workplace productivity.

50 percent of stressed workers site bad debt as the trigger for their sleepless nights while 35 percent are worried about saving for their retirement. The study also found 30 percent of females are more likely to experience financial stress, compared to 19 percent of males. In the US the numbers are similar, with a Bank of America report finding 75 percent of employees suffer from some degree of financial pain.

Last year I wrote a post for Daily Fintech detailing a number of companies operating at the edges of the financial wellness spectrum. Companies profiled at the time – PayActiv, SalaryFinance, Ziero Financial, Zebit and Kashable – mainly focused on salary advances.

More true wellness players are now emerging, such as TRUSTIVO, an online hub that allows employees to access a national network of financial professionals, educational tools, as well as other financial wellness support resources. But strong examples of technology led innovation are thin on the ground. It is clear that this is a wide-open space for innovation, supported by a business community that is increasingly receptive to ways to enhance their workplace offering. Sounds like a no-brainer, doesn’t it?

Ask yourself this – when was the last time your employer offered you a product or service that could have a meaningful, positive impact on your finances? If you work for a large corporate, you’re probably more likely to have had some exposure to something over the past year. But if you work for a small business, a retirement fund option when you signed on is probably where your employer’s involvement in your financial wellness started and stopped.

With cloud services now embedded in many emerging small businesses, delivering wellness options and platforms for employees on top of this is now viable. The idea of employers being active participants in reducing employee financial stress is where PFM needs to head. At the end of the day, salary is the primary source of cash flow for the vast majority of workers. So managing this monthly flow of funds in a responsible way benefits both the employee and the employer. There is no question it is a fine line to tread – not everyone will see value in being told how to spend their money. But for those that are lost at sea, it could be exactly what they need to truly start getting ahead.

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.