By Jennifer Harrison, Freelance Journalist, FinTech Labs
The recent FinTech Labs panel discussion covered global trends (war, oil, inflation, tech stocks, debt, investment in AI), the newly announced Australian federal budget (CGT, interest rates, AI and innovation and the potential impact on productivity, boom in data centres), and the potential impacts of all this on funding for startups, plus how AI can help stop scams.
Speakers on the topic of “Banking on the Future” were expert guests Carolyn Breeze, CEO at Scalare Partners, Brad Joffe, Co-Founder at Apate.ai, and Illiana Jain, an economist and Senior Associate at Westpac.
The panel moderator was fintech expert Glen Frost, Founder of the FinTech & Banking Summit, which takes place annually in Sydney in October, and is now in its 13th year.
Illiana Jain said, “As an economist, it’s been a torturous time, this year and last.”
Jain noted the persistent problem global of inflation and its knock-on effects on higher interest rates, geopolitical tensions, and the upwards impact on input prices including oil. She also noted wider-ranging consequences such as the cost of building and running data centres.
“Over the medium-term, inflation is likely to remain higher, and that’s going to force central banks to keep monetary policy tighter. Higher rates are going to make it a more difficult lending environment, not just for people looking to buy a house, but also for startups,” Jain continued.
“We’re seeing a far more fragmented world and a lot more geopolitical tension that’s going to push up risk sentiment and make investors a little more skittish.
“As you all know, operating in Australia can present disadvantages versus hubs like London and San Francisco,” Jain said while contrasting China’s central government support for innovation precincts, and Asia’s cheaper physical building and labour costs.
“So the tax situation makes it a little bit more difficult to operate, although the government is going to consult.
“You have the power to share with your local MP to help them realise how this policy impacts on the industry as a whole,” Jain noted.
Carolyn Breeze suggested audience members could add some talking points to an email to their MP.
“Not only do we not have a fantastic tax regime for startups in Australia, we also don’t have clear pathways for international growth,” Breeze commented.
As examples, she referred to the lack of trade agreements outside specific sectors and visa opportunities for Australian ventures to move internationally.
“We have a well-developed superannuation sector but less than 0.5% goes to tech companies, and they’re not all Australian,” Breeze said.
Breeze contrasted this with other countries, where 5-7% of pension monies are invested into local tech companies, and in some cases this is mandated.
According to industry reports, only 34% of investment for Australian startup funding rounds is supplied domestically. This means on exit, that liquidity goes overseas, and is not ploughed back into the local innovation ecosystem.
“Only 12% of our startups are founded by exited founders,” Breeze noted, saying this was lower than the international figure of more than 40%.
Breeze explained Scalare Partners’ sector focus agnostic and does include fintech.
“Fintech is very capital consumptive, so it’s a really long road, potentially, from conception right through to ARR and revenue generation, especially in a bear market when you are competing with other startups,” Breeze warned.
“I’m always looking for startups that are building a solution around financial literacy first, for example, in the NDIS or childhood education, and then payments are the necessity for the use case you’ve built your solution for,” Breeze said.
Commenting on AI, Breeze said she is seeing more solo founders.
“I’m always concerned there could be a break-up between co-founders,” she said.
“We’ve always been talking about payments and fintech becoming a seamless part of society, and now that’s becoming more and more real, and AI’s doing that,” she noted.
On the negative aspects of AI, Breeze said, “Fraud and hackers are moving faster than we anticipated, so if you don’t have solutions against that built-in from the beginning, your product is not defensible.”
Joffe from Apate.ai said the platform was specifically built for scams where reported losses are more than $1 trillion globally which is more than the GDP of many countries.
It deploys conversational AI agents who are placed in the firing line to proactively engage with scammers and waste their time and resources at scale. For example, via 90-minute conversations, as well as text and email communications, where URLs, bank accounts, and meta data can be located.
Joffe described it as “counter-intelligence against fraud”.
Apate.ai is working with Commonwealth Bank and Macquarie Bank in Australia and Standard Chartered globally.
Joffe referred to a “paradigm shift” because the traditional banking industry response has been reactive, relying on investigations and recommendations for additional safeguards, rather than proactively preventing financial crime in the first place.
“Now before a scam even reaches a customer, we’ve already captured the bank account and URL they are using, their scripts for impersonating the organisation, and we share that in real time with our partners,” Joffe said.
Early models of Apate.ai specifically focused on voice scams via phone calls.
Today, its bots have had 1.1 million conversations and wasted a cumulative 9 years of scammers’ time, with a measure of success being whether the scammer breaks down and uses profanity due to frustration.
“I think we are one of the only companies that tracks the number of f-words said in relation to their product,” he said. “We celebrate every time that happens.”
Apate.ai has been backed by OIF and Investible.
“The budget has definitely caused us to rethink a little bit how we are going to source capital, but our preference is always to remain an Australian company,” Joffe said.