An political, economic and business analysis of opportunities and threats to financial companies entering the Australian market. Conducted by Colin Johnson and students from Canada, Germany and Spain.

1. Financial Services in Australia -
Going Under in “Down Under”?
Esther Garcia Lopez, Colin Johnson, Keegan Pinto,
Florian Schulz and Cornelius Zerwas
MGMT 4230 - International Management

2. Part of
Commonwealth
An overview
2
Stable Country, But Be Vigilant
Executive Summary Politics Economy Culture Market Opportunities SummaryMarket Entry Mode
The Good
▪ GDP Avg. Growth Rate: .86% since 1959
▪ 26 years without a recession – world record
▪ S&Ps Budget Outlook: Stable
The Potentially Bad
▪ Trade war collateral damage: $36B
▪ Housing boom ends
The Good
▪ Stable Democracy
o EIU Democracy Index: 9.09
▪ Transparency Int'l Corruption Score 77/100
The Slightly Not as Good
▪ 4 Prime Ministers in last 5 years
Politics Economics
GDP per Capita:
$53,800
Population
24,6 Million
Elements of
British and US
governing
systems

3. Political Environment
3
Executive Summary Politics Economy Culture Market Opportunities SummaryMarket Entry Mode
Regular Democratic Ebb & Flows, But Remains Safe
▪ Despite declining corruption indices, still a safe
place for business
▪ Overall an effective and reliable government
Globalization
Despite the urbanized world’s support of
globalization, contempt grows and always
represents an element of uncertainty
Something to Keep in Mind...

4. Economic and Business Environment
4
Executive Summary Politics Economy Culture Market Opportunities SummaryMarket Entry Mode
Open & Welcoming To FDI
▪ Urbanized and modern population with reasonable age and wealth
distribution
▪ Geographic isolation presents some issues for financial services expansion
▪ Majority of exchange risk comes from China, but their current and
projected stated policy has positive impacts
▪ Foreign investment is and has been a key to Australian success
▪ Consistently rated as a great place to do business, strong IP
protection and has FTAs with multiple other countries
ICT
Index
8,4/10

5. Hofstede’s Cultural Dimensions
5
Executive Summary Politics Economy Culture Market Opportunities SummaryMarket Entry Mode
Predominantly Western Values Despite Proximity To Asia
▪ Marginal (A)
▪ Hierarchy
importance (C)
▪ Look after them
selves (A)
▪ Interest of group –
collective (C)
▪ Strive to be the
best they can
be (A,C)
▪ Intermediate
(A)
▪ Risk taking (C)
▪ Normative culture (A)
▪ Pragmatic culture (C)
▪ Impulsive (A)
▪ restrained
society (C)

6. Business Culture
6
Executive Summary Politics Economy Culture Market Opportunities SummaryMarket Entry Mode
Relaxed Business Culture In Comparison To China
DIMENSION AUSTRALIA CHINA
❖ Language
English
Informal
Direct
Chinese
Formal
Indirect
❖ Relationships Short - Term Guanxi
❖ Business Lifestyle Work - Life Balance Work Devotion
❖ Meetings
Relaxed
Punctuality
Hierarchy
Importance
Punctuality
Creativity Index
Rank No.1
(2015)

7. Traditional Sector
7
Executive Summary Politics Economy Culture Market Opportunities SummaryMarket Entry Mode
Entering Traditional Sector Is Not Advisable
▪ Tough regulations
o Obtainment of licenses
o A Ban of mergers
▪ Traditional banks too big to conquer
▪ Traditional Sector too mature for new players
▪ 4 major banks dominate market
▪ Typical domination of local institutions
▪ Among the most profitable in the world
▪ Large profit margins, driven by mortgage
market
▪ Low interest environment
▪ Cool down in housing market
o Smaller loans
o Smaller mortgages

8. Superannuation
8
Executive Summary Politics Economy Culture Market Opportunities SummaryMarket Entry Mode
Local Domination & Regulation Stand in The Way Of Success
▪ Retirement system of Australia uses
huge pension funds, 3rd largest in
the world
▪ Over 500 pension funds
▪ Mature system
▪ Employees can decide how much of
salary to pool into them
▪ Employers have to pay certain
amounts to those funds
▪ Amount employers have to pay into is
due to increase in the 2020s
▪ Only funds that showed growth in
recent years
▪ Australians are more likely to invest than
other nationalities
▪ Specific local regulations
▪ Government wants to reduce accounts
per person
▪ Sector with a bright future
▪ Significant growth expected

9. Fintech – Market Situation & Entry Ideas
9
Executive Summary Politics Economy Culture Market Opportunities SummaryMarket Entry Mode
Needed Change Drives Growth & Successful Entry
▪ Basic online applications
▪ Utilization of traditional channels
▪ Banks lag behind, dissatisfaction
▪ Old, at times unsecure systems
▪ Costumers want online experience
▪ Costumers want higher security
▪ Costumer want to use systems of
different providers
1. Increase competition and transparency
• Cut prices, better decision making for consumers
2. Provide integrated wide range online services
• Payments, marketplaces, account organizing
3. Provide independently and as services to “big players”
Source: KPMG
▪ Wide range of new services
o That banks struggle to
provide
▪ Expected revenues of $3bn, take
$10bn of traditional institutions
▪ Integration of different finance
related operations
Opportunities

10. So far …
USP:
Technology
and
Know-how
Diverse Size
Goal:
Rapid
Expansion
10
Executive Summary Politics Economy Culture Market Opportunities Market Entry Mode Summary
Relatively
Stable
Political
Environment
Sophisticated
Economy
Western
Culture
Market
Potential for
Fintechs
Host Country Characteristics Company Characteristics
FINTECH

11. Small financial risk
No protection of intangible assets
Entry Mode Selection
11
Executive Summary Politics Economy Culture Market Opportunities Market Entry Mode Summary
Protection of USP Through Full Ownership
Exporting FranchisingLicensing
Non-Equity
Joint Venture
Shared-Equity
100% Ownership
Full-Equity
Best choice of entry strategy
Considering market conditions
Protection of intangible assets
Highest financial risk
Better understand market needs
Risk of losing intangible assets
Less overall potential gain
Risks not worth the benefits

12. Importance of Partnerships
12
Executive Summary Politics Economy Culture Market Opportunities Market Entry Mode Summary
Partnerships May Be Necessary
Example: Mobile Payment
▪ Only complements traditional banking
business
▪ Requires customers with bank accounts
▪ BUT: Mobile payment provider usually
do not have those customers
C
O
O
P
E
R
A
T
I
O
N
Traditional Banks
▪ Have the necessary customer base

13. Case Study 1 – – SME Lender
13
Executive Summary Politics Economy Culture Market Opportunities Market Entry Mode Summary
Technology Is The Name of The Game “Down Under”
Non-Bank Lender From Germany
▪ Uses own algorithm for credit check
▪ Provides funds in as little as 5 hours
▪ Online-based
Spotcap News
“The business will also focus on strengthening and
building strategic partnerships” (Spotcap Blog)
Spotcap entered Australia in 2015, and has
“experienced significant growth over the past 3
years…” (Spotcap Blog)
1. Entering Australia? Think Fintech.
2. Enter with a Wholly Owned SubsidiaryEntry Mode: Wholly Owned Subsidiary
Enters Australian Market

14. Case Study 2 – Alipay – Payment Platform
14
Executive Summary Politics Economy Culture Market Opportunities Market Entry Mode Summary
Alipay Seizes Opportunity “Down Under”
Modes of Entry:
1. Joint Venture (Paybang)
2. Partnerships with
Commonwealth Bank & Tyro
Bank
3. Partnerships with
▪ CabCharge - Cab company partnership
to use Alipay Payments Services
▪ Smartpay - Australian payments
provider partnership to bring Alipay to
25,000 retail stores
▪ Quest Payments - Partnership with
Alipay to bring to more retail stores
Relying on Chinese tourist to spread the word
▪ 1.39m Chinese tourists in 2017
▪ 86% of Chinese tourists said their purchases of
Australian goods increased after their visit

15. The Key to Success
If you don’t want to go under …
… be innovative and protect your ideas!
15
Executive Summary Politics Economy Culture Market Opportunities Market Entry Mode Summary
100% Wholly Owned With Partnerships

16. 16

17. Bibliography/References
17
1. Tang, E. (2017). Ease of doing business in Australia remains strong. Australian Government: Australia Unlimited.
Retrieved November 25, 2018, from https://www.austrade.gov.au/News/Economic-analysis/ease-of-doing-
business-in-australia-remains-strong.
2. Macquarie Group Limited. (2018). China devalues its currency- is this good for Australia?
Macquarie Group's Business Banking Expertise. Retrieved November 25, 2018,
from https://www.macquarie.com/au/business-banking/business-management/expertise/economic-update
3. World Bank. (n.d.). Australia: Urbanization from 2007 to 2017. Statista - The Statistics Portal. Retrieved
November 25, 2018, from https://www.statista.com/statistics/260498/degree-of-urbanization-in-australia/
4. Kauffmann, D., Kraay, A., & Mastruzzi, M. (2010). World Bank Policy Research Working Paper No. 5430.
Retrieved November 25, 2018, from https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1682130.
5. Ruthven, P. (2016, August 10). Australia's Growth Industries. Retrieved November 25, 2018, from
https://www.ibisworld.com.au/media/2016/08/10/australias-growth-industries/

18. Bibliography/References
18
6. Drummond, S. (2015). Spotcap joins the small business loan rush. Retrieved November 25, 2018, from
https://www.smh.com.au/business/banking-and-finance/spotcap-joins-the-small-business-loan-rush-20150518-
gh4iur.html
7. Watts, J. (2017). Spotcab Celebrates Third Anniversary. Retrieved November 25, 2018, from
https://www.spotcap.com.au/press-releases/spotcap-celebrates-third-anniversary/
8. Mallis, A. (2018). Alipay Accelerates Australian Expansion With Tyro Partnership. Retrieved November 25, 2018,
from https://which-50.com/alipay-accelerates-australian-expansion-with-tyro-partnership/
9. Bindi, T. (2016). Alipay enters Australian market with Commomwealth Bank partnership. Retrieved November
25, 2018, from https://www.zdnet.com/article/alipay-enters-australian-market-with-commonwealth-bank-
partnership/
10. Tang, E. (2016). Australia Has The Third Largest Pension Fund Asset In The World. Retrieved November 25,
2018, from https://www.austrade.gov.au/news/economic-analysis/australia-has-the-third-largest-pension-fund-
assets-in-the-world

19. Bibliography/References
19
11. Jacobs, S. (2018). 5 challenges facing the big four Australian banks in 2018. Retrieved November 25, 2018,
from https://www.businessinsider.com.au/5-challenges-facing-the-big-four-australian-banks-in-2018-2018-1
12. Pollari, I., Ruddenklau, A., Scally, A., Joyce, A., Wang, A., Hughes, B., Higgins, C., Milligan, D., Maguire, E.,
Gobbo, F., Armstrong, J., Berry, P., Zaheer, S., Korschinowski, S., Chia,T., Pritchett, & W. (2018) The Pulse of
Fintech 2018, 42-53. Retrieved November 25, 2018, from
https://assets.kpmg.com/content/dam/kpmg/xx/pdf/2018/07/h1-2018-pulse-of-fintech.pdf
13. Australian Culture - Business Culture. (2018). Retrieved November 25, 2018,
from https://culturalatlas.sbs.com.au/australian-culture/australian-culture-business-culture
14. Chang, O. (2018). Australia is the most creative country in the world. Retrieved November 25, 2018,
from https://www.businessinsider.com.au/australia-is-the-most-creative-country-in-the-world-2015-7
15. Chinese Business Culture. (2018). Retrieved November 25, 2018, from https://www.legacee.com/the-global-
leader/chinese-business-culture/
16. Country Comparison - Hofstede Insights. (2018). Retrieved November 25, 2018, from https://www.hofstede-
insights.com/country-comparison/australia,china/