Aussie fintechs create jobs and raise capital with sights on global markets

May Lam, EY Oceania fintech leader and EY Asia-Pacific payments leader

Australia’s fintech ecosystem has been a standout throughout the pandemic.

Due to record investor capital raised, new job creation and a rising number of fintechs preparing for global expansion, according to the EY FinTech Australia Census 2021.

Ernst & Young and FinTech Australia collaborated on this year’s Census.

The census shows an increase in fintech whose capital raising expectations were either met or exceeded 82% in 2021 compared to 57% in 2020, with lower reliance on founder funding.

Findings from the 2021 EY FinTech Australia Census

Easing of funding concerns and signs of maturity

Australian fintech deals and capital raisings are now rating globally, with 44% of companies having raised over $10 million to date while 14% increased over $100 million.

88% of Australian fintech three years or older and 81% of fintech two years or older are now post-revenue, another promising sign of the continuing growth of the local sector.

The negative impact of the global COVID-19 pandemic on fintech capital raising initiatives has significantly decreased, from 72% in 2020 down to just 49% this year.

However, more than half (57%) of the survey respondents who have indulged to raise capital revealed that they still experienced struggles in find the right investors.

Further evidence of global growth

72% of fintech plan on entering or expanding into an overseas market within three years, and 60% plan to do so in the next 12 months.

41% of post-revenue fintech report having more than 500 customers.

The sector created new jobs, as 67% of fintechs reported ten or more employees up from 59% in 2020 and 21 full-time employees up from 10 in 2020.

Four in five of the survey respondents (80%) said that Australian fintech is now considered to be internationally competitive, versus 64% who thought the same in 2019.

In the last 12 months, 88% of fintech generating revenue overseas have created new jobs.

Need for additional government support and talent concerns

Two in three (66%) fintech say they find it more challenging to attract qualified or suitable talent in Australia, and 78% want more accessible access to skilled migration visas.

Attracting suitable talents, such as engineering and software skills, is proving the hardest for fintech to draw (62%), followed by product management (31%) and data engineering (30%).

Only one in eight (12%) of the fintechs said that they had have received an Export Market Development Grant in the past, and a further 15% are planning to apply for the grant.

42% of fintech have successfully applied for the R&D Tax Incentive and 11% are in the process.

Moreover, 78% said that access to the RDTI influences their decision to undertake R&D, while 80% say accessible RDTI helps improve their business growth.

New Zealand, which has recently doubled down on its R&D incentives, has jumped to the top of the list of Australian fintechs’ preferred markets for international expansion lately.

39% believe that changes to Early Stage Innovation Company and Early Stage Venture Capital Limited Partnership policies and tax incentives can allow more capital flow into the sector.

Executive comments from Ernst & Young

May Lam is EY Oceania fintech leader in addition to payments leader for EY Asia pacific offered additional insights on the survey.

“The value of the Australian fintech sector as a national export has never been clearer.”

“So it was exciting to find that 72% of fintech plan on entering or expanding in an overseas market within the next three years and 60% have plans to do so within the next year.”

“There’s no doubt that in the post-pandemic rebound race, skilled visa programs and employee retention schemes would help Australian fintech to grow and attract new talent.”

“However, there are other issues around diversity and inclusion that need to be addressed for the sector to remain attractive in an increasingly competitive talent environment.”

“To maintain Australia’s status on the global fintech stage and keep the innovation and talent onshore, we must build meaningful competitive growth pathways for the start-up sector.”

“Increased certainty around incentives, better-coordinated collaboration and strong moves to drive industry diversity will be essential to facilitate us in building a fintech export market and attract the best international tech companies to Australia in the coming few years.”

Fintech Australia’s opinion on the survey

Rebecca Schot-Guppy, Chief Executive Officer at FinTech Australia is optimistic.

“Fintechs play a vital role in rebuilding our economy in the next stage of pandemic recovery as well as in supporting SMEs with digital finance solutions and faster access to payments.”

“The COVID-19 pandemic has accelerated the need for companies to embrace digital models and liable consumers’ relationships with their finances online, accelerating fintech innovation.”

“At the moment, every consumer-facing business requires a digital payment capability, and this has therefore created an increase in the addressable market for fintech.”

“Other recent market changes, such as open banking, are positively impacting the sector.”

“7% of the fintech surveyed are already Accredited Data Recipients (ADRs), a further 25% are showing intent to follow suit, with more planning to connect through an intermediary.”

“This will support greater industry convergence and more collaboration with established financial services institutions, big techs, retailers and other non-traditional players.”

“The research was encouraging after seeing the improvement in gender diversity among fintech in this year’s Census, with 35% of all employees now female up from 29% in 2020.”

“Importantly, the Census also found that women now occupy 26% of leadership positions.”

“These are positive and encouraging results, but we still have a lot of work ahead of us as a sector in order to foster even greater diversity and build a truly inclusive sector.”

“Almost a third of the surveyed couldn’t provide a proper estimate of their diversity profile.”

“However, those survey respondents who could report that an average of 25% of employees are from a culturally and linguistically diverse (CALD) background.”

“In order to drive innovation, we need to continue improving our efforts to build and amplify a supportive ecosystem that will encourage participation from a diverse talent pool.”

Executive Staker opinion on the survey

Malia Forner, The EY Private Oceania start-up and entrepreneurship leader, is confident:

“Australia has for long supported programs that are targeting private capital and innovation investment by businesses, their founders and investors through specific tax incentives.”

“Now is a vital time to support structural modernization and grow investment into innovation, with leading business and investor incentives to attract talent, innovation, and capital.”

“With digitalization accelerated by the pandemic, geographic constraints have been removed.”

“The sector is aware of other markets in the region, like Singapore and New Zealand, where launchpads for start-ups focus on attracting more innovation and employment.”

“Around two-thirds of Australian fintechs which are considering expanding on the international scene will need help to understand the changes in the regulatory environment (69%).”

“Government support and funding to expand overseas (61%) are the main types valued”

“Additionally, almost three-quarters (72%) of Australian fintech surveyed strongly support increased access and grant assistance to a greater diversity of overseas launchpads.”

“Local investor confidence hinges on maintaining stable, globally competitive regulatory, tax and incentive frameworks, where the sector has greater certainty over administration.”

“In the wake of the COVID-19 pandemic, the Government has introduced a range of incentives, stimulus and cash grants to help sustain and attract investment, innovation and jobs.”

“But beyond the pandemic crisis, we need policies and programs consistent with their intent to support founders, innovation and encourage private capital investment for jobs growth.”