Outlook and optimism
As the industry has matured and grown, different types of challenges have emerged. Over the past 12 months, some of the most prominent challenges have included progress on CDR, the cooling of investment (particularly at the start-up end), further cuts to the R&D Tax, continued limitations around skilled migration visas, amongst others. While the challenges are many and varied, overall a positive outlook still prevails. Reflecting the optimism are a number of the highlights in the 2019 Census data:
- Better collaboration with incumbents post Royal Commission... When compared to 12 months ago, Fintechs are experiencing better access to and more collaborative relationships with incumbents. For two in five fintechs, there has been a notable improvement in the relationship post Royal Commission (42%), with just 8% perceiving a negative impact.
- More fintechs are realising profit... With the proportion of fintechs indicating they are in a post-revenue stage increasing significantly since last year (77% vs. 68%). In addition, fintechs indicated median revenue growth of 80% from June 2018 to June 2019. A slowing of median revenue growth in the past three years may be attributable to the increased number of newly profitable fintechs.
- More confidence in local talent... The proportion believing that Australia is wanting for local startup and fintech talent continues to decline, with confidence in the Australian talent pool significantly higher than it was four years ago in 2016.
- Internationally competitive... A majority of surveyed fintechs believe Australian fintechs will be able to compete internationally (63%), up 4% from last year. This belief is particularly evident amongst fintechs who have ‘lived experience’ venturing to overseas markets. The industry is also more likely to back the home team this year, with 48% stating Australian fintechs are capable of competing with international fintechs - compared to a more modest figure in 2018 (38%).
- Progressing towards a more diverse and inclusive industry... The positive trend in female participation both within and at the helm of the fintech start-ups heralds a promising outlook for gender equality within the industry.
From Brexit and the US-China Trade Dispute, to recent political unrest in Hong Kong, the current global climate presents an added degree of potential instability within many major markets. This geo-political uncertainty does make it more challenging for fintechs with global ambition. Despite this, fintechs largely remain optimistic about the opportunities that await offshore. Australia’s fintech presence in overseas markets is strong and forecast to grow further:
- Overseas presence... 41% of surveyed fintechs already have an established presence overseas.
- Intention to go offshore... 51% intend to ‘expand or expand further overseas’ in the next 12 months.
For detailed information about prospective destinations for expansion, please download the EY FinTech Australia Census 2019 Report.