Revenues more than triple for Aussie fintechs
- 06 November, 2017 08:50
Australian fintechs have experienced, on average, a 208 per cent growth in monthly revenue since last year, according to the latest census of the industry by EY.
A quarter of post-revenue fintechs – those that have begun making sales – reported year on year revenue growth had risen by more than 700 per cent.
The census, now in its second year, surveyed 166 local fintech businesses, and found 54 per cent were prioritising overseas expansion, up from 38 per cent in the 2016 census.
“The fact that the industry has experienced a tripling in median revenue is a strong sign that fintech firms are acquiring customers and making strong inroads into the traditional financial services sector,” said the chair of national fintech start-up association FinTech Australia, Simon Cant.
“Equally so, it is exciting to see that fintech firms are now sufficiently comfortable with their domestic positions to be increasingly planning international expansions. This is another sign of a healthy and maturing industry,” Cant added.
The number of fintechs operating in Australia has more than doubled since 2015, and is now approaching 600. Mostly based in NSW (54 per cent) and Victoria (19 per cent), the companies are typically two to three years old (48 per cent) with a median employee count of five full timers and two part time workers.
The most common types of fintechs provide solutions relating to wealth and investment (30 per cent) and lending (23 per cent). The majority have already started making sales (71 per cent).
Nearly half of those surveyed (49 per cent) were eyeing the UK to expand their business into, followed by Singapore, the US and New Zealand.
EY FinTech advisor Meredith Angwin said the census showed how the Australian fintech industry had “come of age” over the last 12 months.
“With the 2016 Census, we saw a snapshot of a sector that, while growing, was still in its relative infancy,” Angwin said. “This year’s results though show that Australian fintech has really started to come of age, with substantial increases in the proportion of fintechs that are now post revenue as well as those that are planning international expansion.”
The latest census follows EY Fintech Adoption Index, published in June, which found Australia had leap-frogged Hong Kong, the US and Singapore in terms of fintech market penetration. Australia was placed fifth on the index, behind China, India, the UK and Brazil.
EY forecast adoption of fintech products by Australians to further increase over the next year, including among older generations who are “warming to the idea” of conducting financial transactions digitally.
With demand for products and the amount of available capital growing, the main challenges reported by Australian fintechs relate to talent, tax and open data.
Half of fintech leaders agreed that there is a lack of experienced start-up and fintech talent in Australia. The majority struggle with finding engineering and software development expertise (61 per cent), followed by those with sales experience (41 per cent) and web development skills (33 per cent).
Disappointingly the sector lacks gender diversity, with the workforce being three quarters male. More than 80 per cent of fintech founders are male, with little change in the past year.
Nine in ten census participants said the most effective growth initiative would be to “make the research and development tax incentive more accessible to start-ups”, followed closely by providing “capital gains tax relief for tech start-ups first incorporated in Australia”.
The majority (85 per cent) believed government mandated open data controls and more transparent access to the New Payments Platform would be most effective in the continued growth of the industry.
“Open data is a big thing for us. As we are a company that tries to get the banks to price risk better, more real insights into the data we have the better we would be able to help. There is a growing community which requires a lot more conversation around what data is available and suitable, as well as a lot more collaboration to make sure that the solution most beneficial to consumers can be found,” Ranin Mendis, founder and CEO of Loan Dolphin, said in the report.
An independent review into Open Banking in Australia, commissioned by Treasurer Scott Morrison in July, is due to report by the end of the year.
“There is a vast amount of work we need to continue to undertake to remove some of the barriers to our industry’s growth,” Cant said. “This includes growing and diversifying our talent pool and driving ongoing policy and regulatory reforms.”