Fintech industry still buoyant, but “not all smooth sailing”

  • By AB+F Editorial

Fintechs are reporting an uptick in the customer growth, are managing to sustain revenue, with other firms even planning global expansion, but one sticky and perennial issue remains according to an industry census

In its fifth year, the key findings from the EY FinTech Australia Census 2020 found that despite the challenges of operating during a global pandemic, the Australian fintech industry remains robust. 

The survey found that 39 per cent of local fintechs now have more than 500 paying customers, up from just 27 per cent in 2019. 

Despite current global challenges, Australian fintechs also remain largely optimistic about offshore opportunities, with 88 per cent intending to expand overseas in the future.

Not surprisingly, payments, wallets and supply chain (30 per cent) and lending (20 per cent) are now the top two types of fintech services, largely driven by a step-change in consumer digital adoption and the rise of the buy now pay later sector. 

In fact, the reshaped payments environment as well as the rise of buy now, pay later has now led to a change in the top fintech categories identified in this year’s census report with payments, wallets and supply chain (30 per cent) now in the top spot, followed by lending (20 per cent) and data and analytics (22 per cent).

“But it’s not all smooth sailing,” according to Ernst & Young fintech advisor Meredith Angwin.

In fact, the study also revealed that 72 per cent of fintechs said that COVID-19 pandemic has had a negative impact on their capital raising ability

“While the industry continues to face its usual headwinds of regulatory concerns and competitive pressure, it is now also contending with added difficulties emerging from the pandemic, such as the tightening of capital and concerns that consumers may return to the perceived safety of major incumbent institutions for their financial services needs in uncertain times,” Angwin said.

This year, more than one in three post revenue/profit fintechs (39 per cent) reported not meeting their capital raising expectations. 

However, they still fared better than the early stage (pre-revenue/launch) respondents, where 54 per cent reported their expectations were not met. 

Overall, nearly three-quarters (72 per cent) of respondents reported that the COVID-19 pandemic had worsened their capital raising situation. 

The report recognized that the government was open to  fostering innovation. Indeed the October budget was described as a ‘fintech budget’ by the sector. 

However, there is still more that can be done in this space and 93 per cent of fintechs surveyed said making the research and development (R&D) tax incentive more accessible would be the most effective potential growth initiative. 

Additionally, four out of five fintechs said that having access to the R&D incentive increases the likelihood of keeping at least part of their business onshore. 

Much work has gone into shaping policy and creating regulatory settings that allow fintechs to thrive,” FinTech Australia CEO Rebecca Schot-Guppy said. 

“This census shows that this effort is having an impact, but more still needs to be done.” 

She ackwnoelged the initiatives announced in the budget but added that the census’ findings also show why it is crucial for the start date of this policy to be brought forward from its’ July 1, 2021 start date. 

“Raising capital is usually a lagging indicator of the health of the sector, so it is concerning to hear that the pandemic is already having an impact,” Schot-Guppy said.