The Tyro Blog

20 September 2016 - 10 min read


Challenger banks vital for ecosystem to flourish

One of my guilty pleasures is listening to shock jock talkback radio. I don’t listen because I agree with what they say, but rather because I’m fascinated by the way they build their arguments, and how and why their listeners react the ways they do.

As in all of life, it’s one thing to disagree with another person’s views, but quite a different thing to understand how and why they formed their views in the first place.

And it’s good to be regularly reminded that one’s own views may not be shared by the majority.

During the recent election campaign the government announced initiatives to drive entrepreneurship and innovation in Australia. There would be a focus on encouraging startups. It was welcome news for those of us working on, in or with startups.

But then I heard a caller to one radio station. His question: why do we need to help startups and produce more companies? Don’t we have enough companies in Australia as it is, why do we need more, shouldn’t we help the ones we have?

I was really taken aback by that question. Are there others out there who think along the same lines?

It’s perhaps little wonder that innovation faded from view as the election campaign continued — rightly or wrongly, large swathes of Australia don’t see things the way we perhaps do.

As a nation we’re not good at a nuanced discussion on our place in the world. A recent article in The Australian nicely captures our Aussie pride at taking on the world and winning. The headline was “Australian actors are getting all the best jobs in Hollywood”. This is great news. It shows how good we are, we are even beating the Americans at their own game. We’re proud of them.

Here’s another from The Australian. “Brain drain worsens as 20,000 Australians work in US tech hubs.” But isn’t this the same as the story before — Australians doing good overseas? Why is one a positive story and the other a negative story? And this is, I believe, how most Australians see things.

This is one of the myths of entrepreneurship and innovation — one of several.

Ask any Australian to name some famous Aussie inventions and I guarantee that you’ll hear about a clothesline known as the Hills Hoist, and a lawnmower known as Victa. These inventions are writ large in the nation’s psyche — symbols of Aussie can-do, resourcefulness, our hands-on practicality, and infused with the clichés of the great Aussie outdoors, our beating sun, and a land crawling with small vicious animals, each one plotting 1000 different ways to inject us with their venom. A land we have tamed, with our Hills Hoists and our Victa lawnmowers.

In fact, both the Hills Hoist and the Victa lawnmower were celebrated in dance at the Sydney Olympics — so connected with our culture are they.

But the thing is, they’re not Australian originals.

There are US patents for a rotary clothesline, going back at least as far as 1854, and there is a version very like the Hills version which dates back to 1875 — 27 years before Mr Lance Hill was even born. So, I’m afraid we copied it.

As for the rotary lawn mower, well, American companies were producing them in the 1920s and ‘30s, well before Mervyn Victor Richardson started the Victa company in 1952.

So, we didn’t really invent them, but that’s an inconvenient truth.

What about modern inventions? What’s on that list? Two caught my eye — the cervical cancer immunisation and spray-on skin. Both Aussie inventions, both doing enormous good for human health across the globe. But … one of the inventors is from Scotland, the other from England. Imports!

If exporting our tech talent to Silicon Valley is bad, how do we feel about all this importing?

As a nation we need to have a nuanced view. We need a mature view. Otherwise our culture of innovation will stall and be left behind.

In February of last year we welcomed our first members to the Tyro FinTech Hub. In March I addressed the NextBank conference in Sydney and outlined our vision for the fintech ecosystem in Australia. A great deal has happened since then.

I said at the time that the leaders of any entrepreneur ecosystem must be the entrepreneurs themselves — if they aren’t then it’s unlikely that the community will be sustainable. Initiatives for the community need to come from within the community, as must the leaders. The flipside of this is that those feeding into the ecosystem — be they banks, advisors, investors, VCs or government, although they play an important role, shouldn’t lead.

I also said that building an ecosystem takes time, and so requires a long-term commitment. A two-year effort won’t cut it, the horizon needs to be more like 20 years. And over 20 years, governments will change several times, bank innovation strategies will wax and wane and maybe wax again, but dedicated startup entrepreneurs will remain, and must remain, leading their ecosystem.

Some of you may have heard that there is another, younger fintech hub in Sydney. And just like with my own kids, the second one to come along is not short of confidence, and loves to be the centre of attention.

But we’re okay with that.

Our focus is 100 percent on the entrepreneurs here in the hub, and with their success. We want our success to be told in their success. We think the entrepreneurs should be the centre of attention.

Just about every visitor to the hub asks us how many companies we have here. My honest answer is that I don’t know.

How many companies, how many media mentions, how much capital has been raised — these are just vanity metrics — satisfying the human urge to have the most of anything that can be counted, and then convincing yourself that everyone values the same measure of success, and so therefore you are the winner.

Vanity metrics might make you feel good about yourself, but they don’t tell the true story.

In contrast our metrics are messy and hard to quantify. What do we try and measure? Do the companies joining our hub develop and grow, and have we done specific things to assist them? Did we set up meetings with investors for them? Did we bring in subject matter experts to help them with a particular problem? Did we help them plan a bespoke media strategy? Did we mine our personal networks to make valuable introductions?

And beyond that … did we notice the new father who was desperately sleep-deprived and ask if he was okay? Did we get alongside the entrepreneur facing the threat of legal action and act as his sounding board? Did we sit down and listen to the entrepreneur asking himself if he’s cut out for this, and the one whose just been sent very bad news about a loved one?

What we believe is that, if we focus on the well being of the entrepreneurs in the Tyro Fintech Hub, and their companies, then the fintech ecosystem will grow. Tyro’s role will be crucial, important, significant, and our success will be told in the success of our members.

I rarely hear anybody talking about these things in the context of innovation culture, but they can’t be conveniently excised.

Space is important as well. Tyro has gone to great lengths and expense to make sure the Hub is a great place to work.

We have great entrepreneurs here, doing great things. What you can’t experience as a visitor, though, is the very strong sense of community we share on this floor — the many ways our members help each other.
And of course there are layers to an ecosystem.

Last year we saw a change of prime minister, and a change in attitude to startups generally, and fintech startups particularly.

  • Angel investors can now get tax breaks for investing in startups.
  • ASIC now has a start-up friendly entry-point for fintechs.
  • A way for fintechs to experiment with novel business models — a regulatory sandbox — is being considered.
  • There is an enquiry into data, looking at, amongst other things, whether banks should be forced to share customer data with fintechs.

Over the past year I have been privileged to be an advisor to ASIC, Jost is an advisor to the Treasurer. But there’s a big piece missing.

Across the globe, governments are making it possible for new banks  — ‘challenger banks’, often digital-only banks — to enter the market. The push for greater competition in banking is one side effect of the GFC for nations that suffered because their banks were too concentrated and too big.

So the trend we expect is, first, startups taking one aspect of banking and excelling — be that foreign exchange, or loans to small businesses, or something else. But the next phase will see those startups bundle with new, digital banks to produce a new breed of bank which is nimble and highly customer-focused.

And here’s where we have a problem. Where are these challenger banks in Australia for fintech startups to partner with?

And of course, that’s exactly where Tyro comes in. And the reason for this hub is to foster that fintech ecosystem. To help those fintech startups. To raise more Tyros.

And so I say to that talkback radio caller: that’s why we need more companies in Australia. That’s why we need to assist startups.

And we need global entrepreneurs, we need to send our talent away and bring talent back — Tyro’s founders cut their teeth in Silicon Valley. The CEO is German. The head of operations is Swiss. The Head of Product is American. The Head of Internal Audit is South African.

We need to focus less on origin and more on destination. My lawn mower doesn’t need to be an original, but it does need to be excellent.

The fintech ecosystem is doing well, but if banking continues to remain concentrated in four powerful giants then we will stall. For the ecosystem to truly flourish banking needs to be opened up to competition. And we’re yet to win that battle in Australia.

And so Tyro’s own contribution to fintech in Australia cannot be underestimated. And it’s our hope here at the Hub that we can play our part in growing the next generation of Tyros.

This is a transcript of Andrew Corbett-Jones’ speech at the recent Tyro nextGen Business Banking Summit (pictured).

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