Data collected by EY and FinTech Australia has shown significant growth and opportunity for Australian fintechs in light of the financial services royal commission.
The 2019 EY FinTech Australia Census is based on an online survey of 120 fintech across Australia, as well as a number of qualitative interviews with industry leaders in the fintech sector.
According to the results, the financial position of Australian fintechs is improving year-on-year, with three in four fintechs now post-revenue, and almost a quarter of local fintechs running at a profit – up from a fifth in 2018.
Additionally, median revenue growth has increased 80 per cent from this time last year.
The impact of the royal commission has been felt by fintechs, as 49 per cent of respondents stated they had seen a stronger uptake of fintech solutions by consumers, and 26 per cent said that incumbent financial institutions had become more willing to partner with them in light of the royal commission.
Further, 42 per cent of respondents reported that their relationship with major financial institutions had improved over the last 12 months.
In terms of future outlook, the fintech sector appears to be optimistic about the future, with 81 per cent expecting to grow their revenue within the next year, 64 per cent expecting to grow their number of employees, and 51 per cent expecting to expand overseas.
Meredith Angwin, Fintech Advisor at Ernst & Young Australia, commented on the growth experienced within the fintech sector in the last 12 months.
“The Australian fintech sector is continuing to mature and grow, becoming increasingly profitable and globally connected,” Ms Angwin said.
“A key theme we are seeing this year is an increase in the degree of collaboration between fintechs and traditional financial services players. While still highly competitive, it’s fair to say that there are much more mature, streamlined and effective relationships emerging.”
According to the study, 85 per cent of respondents said they see the upcoming launch of open banking and consumer data rights as an effective growth initiative.
Co-founder and joint CEO of Prospa Beau Bertoli agreed, saying: “Trust and customer experience will be more important than ever. Fintechs are in a great position to benefit from open banking because we’ve always put the customer at the heart of what we do – but we’ll need to work hard to earn and keep trust.
“This means innovating and improving our products and services every day so we can deliver outstanding customer experiences and that ‘wow’ moment for our small-business owners,” Mr Bertoli said.
The census data highlights the expansion of the sector, with a drop in the percentage of fintech founders who believe there is a lack of experienced start-up and fintech talent in Australia, down to 43 per cent in 2019, from 58 per cent in 2016.
The results also showed gradual but steady growth in the proportion of females working in the sector, growing from 22 per cent in 2016 to 31 per cent now.
Rebecca Schot-Guppy, general manager at FinTech Australia, said: “Significant work has gone into encouraging women in the fintech sector. To see female representation strongly trending positively is incredibly heartening for the industry.”
“While talent is always a key concern for fintech, we’re also pleased to see that it’s becoming less of a burden for emerging companies,” Ms Schot-Guppy said.
“We believe this is a product of more financial services talent seeing fintechs as a viable option for advancing their career and challenging their skills.”
Mr Bertoli shared a similar sentiment, saying: “Finding the right talent for fintechs isn’t easy, particularly when you’re scaling fast. Often you’re not just looking for the best minds, but for people who are going to add to the culture and obsess about the customer no matter their role.
“What we’ve seen is that as awareness of fintech products and services grows, so does consideration of fintech careers,” he said.
The research also found that despite significant growth across the sector, one of its biggest challenges this year has been the tightening of access to capital.
Respondents stated that local fintech capital raisings were down 5 per cent compare to last year, from 43 per cent in 2018 to 38 per cent today, and, of those who have attempted to raise capital, only 45 per cent raised over $1 million in their latest round (compared to 63 per cent in 2018.
However, this is likely to be coupled with the significant increase seen in founder-funding, up from 60 per cent in 2018 to 75 per cent in 2019.
“The funding story for the local fintech sector is certainly markedly different to this time last year,” Ms Angwin said.
“Overall, we are seeing less success in capital raisings and lower levels of funds being raised.
“At the same time, the funding that is available is becoming more conservative and skewing towards the more established and experienced fintechs.”
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Hannah Dowling is a journalist for mortgage business, the leading source of news, opinion and strategy for professionals working in the mortgage industry.
Prior to joining the team at Mortgage Business, Hannah worked as a content producer for a podcast catering to property investors. She also spent 6 years working in the real estate sector at a local agency.
Hannah graduated from Macquarie University with a Bachelor of Media and Journalism.