Outlook and optimism
The challenges confronting any start-up in any Industry are significant, however for the third year, the Census has again affirmed deep self-belief and a bullish outlook prevailing in the industry.
Among post revenue fintechs, year-on-year revenue growth is substantial...
- Fintechs indicated median growth of 125% on their revenue from June 2017 to June 2018.
- This is driven by a segment of fintechs (27%) that have experienced growth in excess of 300%.
- Higher growth rates are also experienced by fintechs under three years in existence, reflecting their lower base start point.
The assured outlook is further emphasised when we look at perceptions around the relative competitiveness of fintechs in Australia...
- Internationally competitive... Six in ten (59%) of fintechs agree that Australian fintechs will be able to compete internationally. Thirty-eight percent agree that Australian fintech organisations will be able to ‘win’ against international peers.
- Local competition... Compared with three years ago, Census participants believe there are more “quality fintech” companies in Australia, which speaks highly of the domestic market. A new factor has emerged that impacts on competition – an increase in the number of established overseas competitors entering Australia. These pose some threats to local fintechs as they arrive with proven business models and already have traction in existing markets, boosting their speed to market.
Despite overseas players entering the market, the industry has a positive outlook, founded on a belief that Australia fintechs have a competitive advantage. As we saw in previous years, they consider the three key elements of this potential competitive advantage to be...
- Regulatory environment... Notwithstanding the revelations from the Royal Commission, Australia’s sophisticated and trusted regulation of financial services provides a solid foundation from which to develop solutions.
- Advanced financial services industry... Australia’s advanced financial services and wealth management sector delivers both commercial experience and creates opportunities.
- Access to Asia... Australia is a good starting point from which to develop export solutions – particularly in the Asia Pacific region with its proximity to capital sources from major Asian centres such as China.
When asked “How will you take your fintech global?”, one founder’s answer was simple, “Start with global scale in mind and build your business with broad market focus”. This also came through in the way many fintechs are developing their solutions, utilising cross-border teams to collaborate virtually.
More than half (54%) of the fintechs involved in the Census are intending to “expand or expand further overseas” in the next 12 months. This is consistent with last year. The main drivers of overseas expansion or relocation are better access to capital (although this is down on previous years) and easier access to talent.
The top two expansion destinations for Australian fintechs are:
- The UK... The UK has one of the world’s most advanced ecosystems for fintechs, with supportive government policies that have created a highly competitive market including digital challenger banks. Although the post Brexit impact is hard to judge, it remains an attractive market for Australia fintechs. The UK – Australia fintech bridge* is a powerful driver of the UK’s status as the number one overseas market for Australian fintechs. When it was announced late last year by the Federal Treasurer, the benefits outlined were to “enable close collaboration between governments, regulators and the industry — to identify emerging trends, share policy developments and better position firms for the challenges of entering a foreign market.”
- The United States... The US has risen to second position due to the fall of Singapore (down 10%) to the number three spot.