Digital Australia Losing Competitive Strength

Australia | Oct 06 2021

Australian fintechs and neobanks are recording record growth, but the country’s digital competitiveness continues to decline relative to global peers.

-A global survey shows Australia’s digital competitiveness continues to decline
-Australian fintech and neobank sectors show record growth
-CreditorWatch believes Australia remains a global leader in fintechs

By Danielle Austin

Strong growth in the fintech and neobank sectors in Australia has not been able to halt the nation’s continuing decline in digital competitiveness, reveals the IMD World Digital Competitiveness Ranking.

Australia's ranking fell for the third year in a row to 20 out of 64 countries.

The nation did exhibit strengths which could spur digital evolution. These included a strong regulatory framework to support start-ups, software piracy IT integration, and e-government.

Business agility and knowledge transfer between companies and universities ranked particularly low.

The Committee for Economic Development of Australia says fostering collaboration between the business and university sectors is necessary to support investment, innovation and value creation in the tech space.

The Committee says improved digital competitiveness and the leveraging of new technology would yield job opportunities, improve government services, and support decarbonisation and climate-change solutions.

Further, the ranking demonstrates Australia’s lack of "future readiness", affecting its ability to sustain digital competitiveness.

The federal government has repeatedly expressed interest in becoming a leading digital economy by 2030, and faces no shortage of opportunities for digital advancement, or opportunities to adopt emerging technologies.

The other side of the coin

The IMD World Digital Competitiveness Ranking results stand in contrast to its other metrics, which highlight strong growth in Australia's fintech and neobank sectors.

While these technologies have long experienced early adoption by younger demographics, regulatory changes are improving their appeal to wider audiences.

Digital financial services globally also benefited from increased adoption during the covid pandemic, as demand for digital solutions rose sharply to support remote workers.

CreditorWatch research shows Australia remains a fintech leader, the number Australian fintech companies increasing to 733 in 2020, from 629 in 2019.

CreditorWatch says the adoption of fintechs can help businesses compete globally, allowing access to new customer segments and markets. Companies that remain engaged with fintech development should lead new financial systems.

Neobanks in the Australia-Pacific region experienced record growth in the first half of 2021. This year, neobanks' total customer acquisitions grew 44.57% and new customer acquisitions 113.62%.

Finbold says growth in the neobank sector has been driven by large tech companies seeking to leverage regional innovation. Increased product offerings and an improved regulatory environment also contributed.

Advancements by fintechs and neobanks are encouraging traditional banks to explore digital trends.

Many legacy banks have introduced in-house fintech capabilities, or formed partnerships with existing fintech or neobank companies to bring new products to customers.

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