By Leon Gettler >>

FACEBOOK’S ENTRY into cryptocurrency is likely to see big tech companies like Apple and Microsoft moving into banking as well.

Professor Jason Potts, a director of the Blockchain Innovation Hub at RMIT Univeristy, believes banks will be challenged worldwide.

Facebook’s ambitious plan creates an alternative financial system that relies on a cryptocurrency that the company has been secretly working on for more than a year.

The cryptocurrency, called Libra, will shake up the banking system and will have partners as diverse as Mastercard and Uber. Facebook hopes to begin it next year with 100 partners. 

It would be the most far-reaching attempt by a mainstream company to jump into the world of cryptocurrencies and could become the foundation for a new financial system not controlled by today’s power brokers on Wall Street or central banks. 

The social network hopes it will help 1.7 billion people without a bank account to transfer money instantly and affordably, from their mobile phones.


Technology to make transactions with Libra will be available as a standalone app – as well as on WhatsApp and Facebook Messenger platforms – as early as 2020. It will allow consumers to send money to each other as well as potentially pay for goods and services using the Facebook-backed digital currency instead of their local currency.

The Libra digital token will be directly backed by government currencies like the dollar or euro, according to a paper describing the technology. Unlike Bitcoin, the best-known cryptocurrency, it will not fluctuate in value any more than real-world money, and it is not likely to appeal to speculators.

To acquire Libra (a reference to the Roman measurement for a pound, once used to mint coins) through a new Facebook subsidiary, called Calibra, users are likely to have to show government identification like a driver’s licence, which would make it unappealing for black market transactions like buying drugs. 

Facebook said the design of Libra would allow individuals to store, spend and transfer money with close to zero transaction fees. Libra is partly targeted at the $613bn annual market for cross-border remittances. Analysts are suggesting Libra could be a huge moneymaker for Facebook, arriving as its growth slows.


Dr Potts said if Libra gets regulatory approval, we can expect to see other tech companies moving in.

“If Facebook can do it, what that means is that companies that have much higher levels of trust around securities, such as Apple, it will be open slather for them,” Dr Potts told Talking Business.

”It will be a really interesting test with Facebook doing this.

“Facebook and its consortia of other large companies have come in but there’s a few that are obviously missing. Microsoft wasn’t on the list, Apple wasn’t on the list and we can expect them to have the same idea and the same reason to do the same thing.

“They also have billions of customers that they’re providing communication, social media or tech services for. Facebook is the first.”

Dr Potts said, at this stage, “we don’t know what the regulations will be” but suggested it could be something like Uber, which went in and funded legal protections, declared war on the taxi industry globally and fought it out in the courts.

He said it will be an interesting battle to watch.

“Banks are large, tech companies are larger. So I think it’s going to be a fair fight,” Dr Potts said.

“If we were having this discussion 20 years ago, you’d say what’s big tech? How powerful can they possibly be? Right now, if we go through the list of the top 10 companies in the world, nine of them are big tech.” 

Dr Potts said it was not clear, at this stage, what the outcomes will be but it’s the first time there has been a competitor to global banking.

Hear the complete interview and catch up with other topical business news on Leon Gettler’s Talking Business podcast, released every Friday at


By Leon Gettler >>

AUSTRALIA’S EMBRACE of payments platforms could see it become a cashless economy, according to Michel van Aalten.

Mr van Aalten is the country manager of Australia and New Zealand for Adyen, a leading payments technology company that provides businesses with a single global platform to accept payments anywhere in the world.

Mr van Aalten has worked with retailers across Europe, the US and the Asia-Pacific region and has extensive experience in the global payments industry. He said the systems would encourage the growth of cashless payments in Australia.

Mr van Aalten  said Adyen research has found a growing market in Australia for mobile wallets.

“It all started with cash, and from cash it went to card and now we’re seeing the rise of mobile wallets,” Mr van Aalten told Talking Business.

“We are seeing more and more Australian banks offering mobile wallets to their consumers as well as more merchants offering these payment methods. It’s an ongoing trend and one we definitely welcome. 

“Based on insight from our own platform, we can see the use of digital wallets in Australia is relatively low.

“However, 35 percent of Australian companies have accounts in place to support digital wallets, more than our international counterparts, so I think as a nation we are equipped to accommodate these types of payments and it seems we are slowly starting to warm up to it.”

Mr van Aalten said the other big trend is the emergence of other payment methods.

“Payments are culturally determined and that’s always evolving,” he said. “As you look at the Adyen platform, we are the only solution that connects directly to Australian consumers’ preferred payment method of Visa and MasterCard.

“But now we’re seeing a rapid change with the likes of WeChat and AliPay and UnionPay are becoming more and more important.”

Mr van Aalten said the Chinese payment methods offered great opportunities for Australian retailers.

He said there were $12.8 trillion worth of mobile transactions in 2017 in China – and China is the world’s largest mobile payments market. This was an enormous opportunity for Australian retailers to tap into the Chinese tourism market.

“In 2017 alone, Australia saw 1.3 million Chinese tourists spend a record A$10 billion accounting for a quarter of Australia’s tourism earnings for the year,” Mr van Aalten said.

“This figure is set to boom if Aussie retailers can effectively embrace the power of these payment methods.”

He said Australia was a unique market which was now on the cusp of a behavioural change in how Australians pay for their goods. ANZ bank, for example, had recently reported a big uptake in mobile payments.

Hear the complete interview and catch up with other topical business news on Leon Gettler’s Talking Business podcast, released every Friday at

By Andrew Conway >>

WITH THE END of the financial year fast approaching, some taxpayers are turning their mind to organising themselves in preparation for lodging their 2019 tax return early in July.

We at the Institute of Public Accountants (IPA) understand there is a strong incentive to lodge early to get your hands on some extra cash courtesy of our tax system if a refund is expected. 

We want to remind taxpayers that there are added complexities in lodging early, particularly this year due to two new factors at play.

First, Parliament needs to pass the announced increase in the low and middle income offset which applies for the 2019 income year.  Eligible taxpayers can receive up to an extra $530 for singles or $1,080 for a couple. The ATO has stated that it cannot process the higher amount until the law is passed but will be able to automatically amend a return if the law changes after a taxpayer receives their assessment.

Second, single touch payroll has come into operation. Some employers no longer need to provide a payment summary to employees as this information can now be accessed via myGov. The information available in early July may not be accurate until the employer completes a finalisation process. Until this happens employment income will show a notation 'tax not ready'.

Consistent with prior years, third party data such as dividends, interest, share disposals etc. is progressively uploaded onto the ATO systems during the month so it normally takes some time for the pre-fill information to be finalised.

The ATO has the right to auto-amend a return which it has been doing for discrepancies, but interest and penalties can be applied by the ATO.

Our advice is that unless you have certainty and completeness around the information used to finalise your return, we are encouraging all taxpayers to rethink lodging returns early this year especially in light of the above changes.

Last, and more importantly, work related deductions (WRE) has been a focus area which has come under more scrutiny. The tax gap for individuals of $8.7 billion has been largely caused by overstatement of WRE.

Random audits have revealed high error rates from both agent and non-tax agent returns. The ATO will be using tools such as data analytics to highlight possible over-claiming. 

Taxpayers need to be constantly reminded that our tax system relies on self-assessment so the buck stops with the taxpayer.

Some 70 percent of the population seek the services of a trusted professional for assistance in navigating their way through the tax return process.

Tax can be complex depending on personal circumstances so if you are unsure of your obligations professional help is recommended.

Andrew Conway is the chief executive officer of the Institute of Public Accountants. The IPA, formed in 1923, is one of Australia’s three legally recognised professional accounting bodies.  In late 2014, the IPA acquired the Institute of Financial Accountants in the UK and formed the IPA Group, with more than 36,000 members and students in over 80 countries.  The IPA Group is the largest SME focused accountancy organisation in the world. The IPA is a member of the International Federation of Accountants, the Accounting Professional and Ethical Standards Board and the Confederation of Asian and Pacific Accountants.


THE much-voiced concern about Labor’s franking credits policy impacting on self-managed super funds policy is all smoke and no fire according to a QUT Law School Visiting Fellow.

However, he said people with shares in their own name – including many pensioners - could suffer a financial setback.

Alastair MacAdam, a former QUT law lecturer with a background in the legal profession and tax accountancy, claims those with self-managed superannuation funds don’t have to lose out at all. 

“For more than 30 years dividends paid to shareholders have had credits - franking credits or imputation credits - attached to them that are equal to the amount of company tax already paid on those dividends,” Mr MacAdam said.

“So if a shareholder pays tax, they can use the franking credit to reduce their tax, but if they pay no tax, then the franking credit is refundable as a cash payment from the government.

“Opposition Leader Bill Shorten has announced that if Labor is elected, they will continue to allow shareholders to reduce their tax with franking credits, but will stop giving cash refunds for excess credits," Mr MacAdam said. 

“There has been much debate and fear generated over this yet there is a way in which people can avoid losing out on the refund, at least so far as shares that are held in a self-managed super fund are concerned.

“Government and industry funds will not be affected by the proposed policy so individuals can simply switch to one of those funds but still effectively maintain their self-managed status.

“QSuper, for example, offers a ‘self-invest’ option and others do too. So you can capitalise on their knowledge but have your independence too, as well as choose where your shares go.

“If you don’t pay tax, or you are over 60, you can still direct that your parcel of shares be made up of companies with franked dividends. The catch is you have to select companies from the top 300 ASX but it is a genuine alternative to a self-managed fund and comes with franking credits," he said.

“So while Labor has said it will save $6 billion for the economy but they are being disingenuous; probably half of that is more realistic.”

Mr MacAdam said the people who will be most affected by the proposal are pensioners.

“Labor has said that anyone who was classified a pensioner in March 2018 will be exempt but everyone who becomes a pensioner after that will lose their imputation credits,” he said.

“There is all this talk about ‘the big end of town’ as if everyone with shares is a fat cat but in reality, lots of people inherit shares from family while others bought into the popular public floats by the Commonwealth Bank, AMP and Telstra over the past two decades.

“For many people who are on a full or close-to-full pension who have a small parcel of shares those franking credits are hugely important as a supplementary income.”

Mr MacAdam said people with self-managed super funds who do not pay tax can get around the proposal by selling shares held by their fund and transferring a lump sum into an industry or government fund that has the ‘self-invest’ option.

He said that for people whose fund was in the pension mode, there would be no capital gains tax payable on the sale of the shares as such funds are completely exempt from income tax.

“However, if you own shares outside of a super fund, you may be affected by this policy. You can sell them and put them into a fund but you will pay capital gains tax. Pensioners might be able to do this too but it will be a lot harder for them,” Mr MacAdam said.

“Of course the fact a policy has been announced doesn’t mean change will occur straight away. It could be years before we see actual legislation.

“It is also important that anyone in such a situation should seek independent financial advice.”


By Leon Gettler >>

THE Royal Commission is opening new markets for small operators moving into wealth management.

Simon Madder, the CEO of Prime Financial, said banks were now getting out of wealth management following the shellacking they got at the Royal Commission, opening the way for small businesses.

And they do it much better than the banks, simply because the banks are too big. 

“I think in its simplest form, personalised service,” Mr Madder told Talking Business. “I think there’s a challenge in getting too big and I think if you don’t have the right systems and processes and you’re not close enough to the customer or client, then the theory of what you’re trying to do versus the practice can become quite different.

“I’m not suggesting that banks in the past haven’t put clients first…but perhaps it’s been more product driven than advice or service based.”

Mr Madder said it was understandable why banks had originally moved into wealth management. It was all to sell their clients more services and products, such as insurance.

But banks had moved away from that because it was too difficult.

“You can understand given some of the challenges that have been faced and trying to disentangle the products from the advice piece why the majority of the banks and the investment banks have headed away from it,” Mr Madder said.

He said the findings of the Hayne Commission had shaken the industry.

“In its simplest form, it was shining a light on practices that were fairly questionable.”

The problem with the banks is they had put the product first, ahead of service to the client.

The Royal Commission also raised questions about educational standards and making sure the right people were there giving advice to a client.

“Absolutely it’s impacting, whether it’s a large institution or independent non-bank owned advisory firms,” Mr Madder said. 

“Rightly, clients are asking questions and that can only be a good thing, I would have thought.”

Hear the complete interview and catch up with other topical business news on Leon Gettler’s Talking Business podcast, released every Friday at


FOR THE FIRST time in the five years and 10 rounds of the Scottish Pacific SME Growth Index, the number of SMEs who turn to their main bank to fund growth has dropped below the 20 percent mark.

The SME Growth Index research released today is conducted independently by banking analysts East & Partners, on behalf of national working capital funder Scottish Pacific.

In March 2019 Index findings, for the first time SMEs are about as likely to turn to an alternative lender as they are to ask their main bank to fund growth.

East & Partners predicts that, if the current trend continues, by the second half of 2020 alternative lenders will overtake SMEs’ main relationship banks as the key funders of new SME business investment in Australia.

Scottish Pacific CEO Peter Langham said there were many reasons behind this trend, including banks’ credit conditions tightening, business owners looking for more flexibility and funding that allows them to grow, as well as the tightening property market and SMEs’ dislike of having to use property as security for their business loans. 

“Small business owners traditionally have been ‘rusted on’ to their banks, but they are becoming increasingly open to non-bank alternatives to fund their operational and strategic growth needs,” Mr Langham said. 

"Scottish Pacific has been helping business owners for 30 years and we continue to grow. The main change we've seen in the non-bank lending environment recently is that we are funding larger deals.

“The research shows that when it comes to funding growth, traditional bank borrowing keeps trending downwards, as more businesses ‘shop around’ for a customised funding solution.”

The research was conducted from November 2018 to January 2019, after publication of the Royal Commission into Banking’s interim report and during the last round of its public hearings.

This round, significantly fewer SMEs, when asked “how are you going to fund your expected business growth in the next six months?”, said they’d approach their main bank (19.5%, a drop of more than three percentage points from September 2018).

When polling began in September 2014, just over 38 percent of SMEs were turning to their main relationship bank to fund their planned growth.

The biggest gains were made by the non-bank lending sector, the first choice as funders of growth for almost 18 percent of business owners (up from 15 percent six months ago).

This trend towards non-bank lending is supported by data showing that many of those not using non-bank lenders in 2018 were open to do so in the future. In March 2018 43.5 percent of SMEs said they wouldn’t consider using non-bank lending. Twelve months on, not even one-third of business owners are in this category.


The most popular alternative finance product nominated by SMEs to fund their growth in 2018 was trade and import finance (currently used by almost 33% of all businesses polled), followed by debtor or invoice finance (9%), with fintech and other funding methods used by 5.8 percent of the 1257 SMEs surveyed.

Few businesses in the $1-20m revenue category are using merchant cash advance (2.5%), peer to peer lending (1.4%), crowd-funding (0.9%) or other online lending options (0.7%), Mr Langham said.

About 96 percent of SMEs are drawn to alternative lenders mainly because of fast credit approval and reduced compliance, and the advantage of not having to borrow against the business owner’s home. Growth SMEs are five times more likely than non-growth SMEs to use an alternative funder in preference to a bank.

He said despite the gains into the SME market made by non-banks, there was still room for sector growth.

“Two-thirds of SMEs said they did not use non-bank lending options in 2018, but more than half of these said they’d be open to it in the future,” Mr Langham said.


One of the big advantages of alternative lending is that in most cases, business owners don’t have to put the family home up as security.

“Alternative finance is building momentum, underlined by the clear reluctance of business owners to borrow against property. The SME Growth Index found that nine out of 10 SMEs would be willing to accept a higher interest rate if it meant they didn’t have to provide property security.” Mr Langham said.

For the twice-yearly SME Growth Index, the owners, CEOs or senior financial staff of 1257 SMEs across a range of industries and all states, with annual revenues of $A1-20 million, are surveyed and interviewed.

Other key findings this round:

* A high proportion of SMEs relying on 'dumb debt' (such as personal credit cards) or owners' equity to fund new productive capacity - strategies that can actually limit new business investment opportunities.

* Business owners are more optimistic about growth than they have been for three years. More than 53 percent of SMEs are expecting to grow in the first half of 2019, at an average revenue increase of 4.9 percent.

* Regardless of any long-term financial services regulatory changes which may flow from the Royal Commission, in the short-term SMEs are already seeing an impact on their access to funding. More than half of all SME respondents say the Royal Commission has made it harder, or will make it harder, for them to access business funds.

 Click for full copy of SME Growth Index


About Scottish Pacific

Scottish Pacific is Australasia’s largest specialist working capital provider, helping thousands of business owners with the working capital they need to succeed. Scottish Pacific lends to small, medium and large businesses with revenues ranging from $500,000 to $1 billion.


DIGITAL banking platform start-up, Trade Ledger, was named the Ashurst Fintech Start-up of the Year for 2018 after expanding into the UK market and signing up a series of major deals in its first year.

The award goes each year to an Australian financial technology (fintech) start-up ‘that has disrupted the financial services sector with new and innovative services, creating competition and transforming the way we experience financial services’.

Trade Ledger has managed this by being the first corporate lending platform in the world to automate the entire credit assessment process, assess SME supply chain data in real-time, and calculate risk – down to the individual invoice. 

This allows banks and other business lenders to tap into the A$90 billion of unmet business credit demand in Australia, and US$2.1 trillion globally.

“As the global economy transitions towards smaller, high-growth businesses – our all-important start-up and innovation ecosystem – business lenders have an obligation to learn how to supply working capital desperately needed by these businesses of the future,” Trade Ledger CEO and co-founder Martin McCann said.

“Australian banks and business lenders also face risks on several fronts. On the one hand, they need to improve both their cost/income ratio and their capital efficiencies within this segment that is traditionally considered as high risk.

“On the other, they are facing increased competition from technology behemoths such as Amazon, Tencent, and eBay, who are all threatening to use their hordes of data to enter financial services.

“The Trade Ledger platform equips these lenders with the same degree of technological proficiency as these massive tech firms, while arming them with the tools needed to meet our booming innovation ecosystem’s need for credit,” Mr McCann said.

This is the third year of the FinTech Awards. The awards owner, Glen Frost, said he was particularly impressed with both the quality and quantity of this year’s applications.

“The 3rd Annual FinTech Awards recognise and reward the innovators and the risk takers,” Mr Frost said. “To be recognised by your peers for your innovation and entrepreneurial spirit will sustain you through the tough times, it will motivate you, and it will show your customers, investors and staff, that you’ve got what it takes.

“I congratulate Martin McCann, and his team at Trade Ledger, on winning the Ashurst FinTech Startup of the Year.”


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