EY FinTech Australia Census 2017 FinTech Australia... · Introduction About the research The Australian fintech landscape Drivers of success Future focus EY FinTech Australia Census

Introduction About the research Drivers of successThe Australian fintech landscape Future focus

EY FinTech Australia Census 2017 | 1

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FinTech Australia

EY FinTech Australia Census 2017

Profiling and defining the fintech sector

Introduction About the research Drivers of successThe Australian fintech landscape

TEY FinTech Australia Census 2017 | 2

Future focus Contact us

Contents

Introduction5

The Australian fintech landscape

8

Drivers of success12

Future focus22

About the research7

Contact us27

Introduction About the research Drivers of successThe Australian fintech landscape Future focus Contact us




24%

14%

24%

20%

10%

6%

Over the last year, the Australian fintech industry has matured

Median revenue growth (post revenue companies)

Year on year post revenue growth has been substantial

Revenue decline

Nil growth

1% to 100%

101% to 300%

301% to 700%

>700%

57%

71%

Post-revenue fintechs

A greater proportion are now post revenue

2016

2017

June 2017 vs. June 2016208%

Key business challenges decreasing

Suitability of systems and viability of business models are less likely to be internal impediments

47%

2016Creating suitable

systems and

processes 31%

2017

37%

2016Business model

viability 25%

2017

Future outlook

More fintechs are looking to expand overseas in the next 12 months

38%

2016Expand/expand

further overseas 54%

2017

Median fintech post revenue growth

United Kingdom

Singapore

United States

New Zealand

Hong Kong

Canada 22%

22%

27%

38%

40%

49%

Top 6 markets for potential expansion (excl. don’t know)




Fast facts: The fintech landscape in Australia 2017

Sector profile

Fintech leader profile (founders/CEOs)

Capital (multiple response – excl. don’t know) Government support and the regulatory environment

Type of fintech (top 2)

TalentMonthly burn rate

Outlook: Next 12 months expectations

End customer profile

Relationship with incumbents

Globally competitive

63%agree Australian fintech companies will be able to compete internationally

45%agree Australian fintechs will be able to win against international fintechs

Private funding

Commercial funding

72% 57%

40%25%

32%

Average scale of last capital fundraising $3.0m

$4.1mAverage capital raised to date

Average burn rate (excl. profitable fintechs)

Top 2 talent shortages:

Engineering/software

Sales

Top 2 approaches to talent recruitment

Founders/ employees/ personal contacts

Recruitment agencies

NSW

VIC

Other

1 year or less

2 to 3 years

>3 years

Base:

28%

19%

54%

Company age:

31%

48%

21%

No. of employees (median):

2

5Full time

Part time

Company stage:

Both30%

Retail consumers

Sophisticated investors

45%

22%

SME and other start-ups

Corporate

35%

33%

Banks and other FSI’s

Government

43%

14%

40%nominate “building partnerships with banks and other financial institutions” as a key external challenge

Paying customers

5% 21% 21% 24% 29%

None 1 to 10 11 to 50 51 to 500 >500

No. paying customers

(post revenue)

Grow revenue

75%Grow employee rate

63%Expand/ expand further overseas

54%

agree accelerators/incubators are important contributors to the success of the fintech industry

85%

60%

agree government mandated open data protocols would be effective

39%have a financial licence

71%

55%

61%

41%

39%

17%

Lending

23%Wealth and investment

30%

76% male

24% female

Gender (workforce participation)

Education: Average no. of start-ups founded:

2.1

only B2C 25%

only B2B 41%

Industry gender profile

of fintechs have all male founders

83%

Median fintech post revenue growth

June 2017 vs. June 2016

46%Agree that attracting qualified or suitable talent is an internal challenge

208%

54% post grad

32% under grad

Post-revenue

Pre revenue

71% 29%

$115k



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Introduction




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Welcome to the second EY FinTech Australia Census 2017.

FinTech Australia has continued its successful collaboration with

Ernst & Young Services Pty Ltd (EY) and Ernst & Young Services

No.2 Pty Ltd (EY Sweeney) to deliver this important piece of

research. This Census remains the most detailed and broad

analysis of the Australian fintech ecosystem and at initial release

in 2016, was the first census of its type globally.

This research initiative forms a critical part of FinTech Australia’s

efforts to foster a thriving fintech ecosystem. Australia’s fintech

industry is continuing to grow and is increasingly becoming the

first choice for businesses and consumers when they are

selecting a financial service.

The Census gives us hard data and credible insights to back our

advocacy work to drive the industry’s ongoing expansion. This

year’s Census delivers new insights into key industry issues,

including how we increase female participation, encourage

international expansion and remove barriers to growth.

This report is also arguably the best source document to define

the overall shape of Australia’s fintech industry and how we

differ to overseas markets. It gives us fine-grain detail about the

established and emerging sub-sectors within fintech and helps

track the industry’s increasing maturity in terms of company size

and revenue.

We hope you enjoy reading the Census and learning about the

dynamic fintech industry we have here in Australia.

Danielle Szetho, FinTech Australia CEO

Simon Cant, FinTech Australia Chair

Stuart Stoyan, FinTech Australia Deputy Chair and

FinTech Census Founder

Mark Skelsey, FinTech Australia Director of PR and Communications

The fintech sector is evolving rapidly in Australia and

around the world. EY is committed to working with

fintechs, investors, regulators, governments, education

institutions and accelerators/hubs to help the industry

realise its potential. An important part of our

commitment has been to deliver comprehensive,

focussed and prescient thought leadership to help define

the industry, identify the challenges and cast light on the

way forward.

For the second year, the EY FinTech Australia Census

provides an exciting contribution to this commitment and

recognises the strong global connection within EY

supporting the Fintech industry. It is essential research

conducted with the Australian fintech community by EY

Sweeney. It delivers a powerful fact base, combined with

broader insight to inform and inspire those involved with

the sector.

We are proud to be collaborating with FinTech Australia

on this significant initiative and pleased to be able to

share the findings.

Rowan Macdonald, Partner Financial Services, Ernst & Young

Services Pty Ltd, Australia

Meredith Angwin, Partner Financial Services, Ernst & Young

Services Pty Ltd, Australia

FinTech Australia

Introduction



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About the research

Background

FinTech Australia was founded in March 2016 and is the

peak body for fintech organisations in Australia. The

board of FinTech Australia focuses on four major streams

of activity on behalf of its members – advocacy, support,

promotion and connection.

As part of this charter and in recognition of the growing

and dynamic nature of the fintech industry, FinTech

Australia identified the need to profile the organisations

currently operating in Australia to provide definition for

the sector.

In line with EY’s deep experience in fintech, coupled with

the knowledge/experience of EY Sweeney, EY was

commissioned to conduct a census of fintechs in Australia

over the last two years. A broad research program was

set in place in collaboration with a FinTech Australia

steering committee. The research was conducted

between August and September, 2017.

This report presents the key findings and it will act as a

powerful platform for FinTech Australia when engaging

with members, stakeholders, commercial partners,

regulators and government departments.

A dedicated website providing further access to the data

and insight from EY fintech professionals can be accessed

here.

Methodology

Quantitative research:166 online surveys

► 15 minute online survey

► Conducted with people currently working in the fintech industry

► 57% of participants are founders of fintech companies, 55% are CEO's and 16% are heads of functional areas

► A mix of members and non-members of FinTech Australia

► Contact lists provided by FinTech Australia

1

Vox-pops:16 interviews

► Short interviews at Melbourne and Sydney hubs

► Conducted with fintech leaders

► Interview quotes are on the EY FinTech Australia Census 2017 microsite

3

Qualitative research:10 in-depth interviews

► 45 minutes in length

► Conducted with leaders of the fintech community

2

Other EY fintech reports

In particular, three EY reports have been referenced in this Census report and the microsite:

► The Fintech Adoption Index 2017

► EY UK Fintech Census 2017

► UK FinTech: On The Cutting Edge – An Evaluation of the International Fintech sector 2016

4

Fintech founders 8

Industry leaders (CEOs, Directors) 2

The research program was designed and run by EY’s dedicated market research practice, EY Sweeney

About the research

http://fintechauscensus.ey.com/



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Introduction About the research Drivers of successThe Australian fintech landscape Future focus Contact usThe Australian fintech landscape



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Fast facts: Sector profile 2017

Business based

End customers (multiple response – excl. don’t know)

Age of company (excl. didn’t answer)

Company stage

Wealth and investment

Lending

Data analytics / Big Data

Payments, wallets and supply chain

Asset management and trading

Regtech

Business tools

Marketplace-style / peer-to-peer solution

Identity, security and privacy

Blockchain/distributed ledger solution

Insurance/insurtech

Accelerator/venture capital

Crowdfunding/fractionalised investing

Challenger/neo bank

Digital/Crypto currencies and exchanges

Other

54%

19%

1%

9%

12%

4%

0%

2%

NSW

VIC

TAS

SA

NT

QLD

WA

Overseas

Biggest competitors (excl. none)

Retail consumers

Sophisticated investors

SME and/or other startups

Corporate

Banks and other FSIs

Government

Other

45%

22%

35%

33%

43%

14%

15%

55%

Net B2C

71%Net B2B

Number of employees (median)

Type of fintech (multiple response)

5Full-time

2Part-time

30%

23%

18%

16%

11%

10%

10%

10%

6%

5%

5%

5%

5%

4%

4%

9%

36%Incumbents

29%Other fintechs

in Australia with a similar

offering

27%Overseas

fintechs with a similar offering

7%Other

20172016

57%71%

43%29%

Pre-revenue

Post-revenue


20172016

20%31%

44%48%

36%21%

1 year or less

2 to 3 years

> 3 years

Net 2 yrs or more

79%



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In 2016, FinTech Australia had identified

some 250 fintech companies in Australia.

We now estimate there's close to 600.

From Hobart to Townsville, Perth to Gold

Coast - great fintech companies are

emerging everywhere.”

Danielle Szetho, CEO

FinTech Australia


The Australian fintech industry has matured over the

past twelve months. It has evolved from being quite a

fragmented tech sector fuelled by the belief and passion

of the founding firms to one that has much greater

definition and structure. It is an industry in Australia

that has meaningful scale and an ecosystem that

delivers effective support to help breed success. It is

still early days, but the transition in a short period of

time has been pronounced.

It’s estimated that the number of fintechs operating in

Australia is now approaching 600, having more than

doubled since 2015. This growth in the number of firms

is an important metric when assessing the strength of

the industry, it can be read alongside a number of other

industry characteristics that further underline the

contention that this is a more mature tech sector.

► A greater proportion of fintechs have been in

business for more than three years and that points

to stability and resilience.

► The proportion of Australian fintechs that are now in

the post revenue stage has also increased indicating

that the products/service offerings are in demand

and filling gaps in the market.

► What falls under the ‘fintech’ banner is now much

broader (think RegTech, cyber/digital security, Data

Analytics etc.) and firms that would see themselves

as ‘fintech’ are stretching far and wide into other

tech industries (e.g. Agtech, etc.)

Perhaps the most important determinant of this

bourgeoning maturity for B2C firms is the level of

receptiveness of the Australia public. In EY’s recently

released Fintech Adoption Index conducted across

twenty markets we saw…

► The global average for fintech adoption was 33%

► Australia ranked 5th with a 37% adoption rating.

While in the shadows of the quite different markets

of China (69%) and India (52%), Australia is on par

with other developed economies with similar

financial systems (e.g. US and UK).

► This level of adoption shows that fintech is now at a

tipping point where it is poised for mainstream

adoption.

The prevailing outlook of many of the fintech industry

leaders is optimistic, if not bullish about what the future

holds. While the risk is still high and hard graft is the

norm, there is recognition that there is greater support

and that the barriers to success while still pronounced

are less than they were.




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While there is undoubtedly momentum and more

success stories will come to the fore, it is still important

to recognise that there is no yellow brick road. The

archetypal fintech is lean (median of eight staff) and

founders are kept awake at night by ever-present

factors like future funding, customer uptake, cash burn

rates, regulations, licensing, amongst other

fundamental business drivers. They are optimistic but

there is an undercurrent of anxiety.

The fintech industry in Australia operates in a highly

competitive local, regional and global environment.

Success in the future will be predicated on the level of

support that continues to be set in place – support that

will enable fintechs to flourish. This summary report

both profiles fintechs and provides clear insight into

what they need to forge ahead. The industry is at a

point where, as one luminary put it, “we have moved

past the exuberance phase.” The early hype has

levelled out and the industry is now more robust and

defined.




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Drivers of success

Introduction About the research Drivers of successThe Australian fintech landscape Future focus Contact usDrivers of success



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Drivers of success

Commercial success is the holy grail for fintech

organisations, with all aspiring to have a major impact in

the specific segment of the financial services market in

which they operate. Alongside profiling the fintech sector

in Australia, a key area of focus was identifying the main

factors that will underpin success for a fintech and the

challenges potentially confronting fintech leaders.

The topic was explored from a number of angles, including

ranking the main internal and external challenges. What

emerged underlines the complexity inherent in launching a

successful fintech, with a range of forces potentially

conspiring against ambitions being realised. It also throws

the spotlight on where those working to support the sector

can focus to set in place the right infrastructure and

conditions to maximise success.

Consistent with last year, five key drivers of success were

isolated. Importantly, these also build on the extensive

analysis conducted by EY on the international fintech

scene1. These drivers of success collectively create an

ecosystem that will help the Australian fintech industry

flourish.

For each driver of success there are a number of variables

that can impact on fintechs – either at an industry-wide

level, or from an individual firm perspective. We have

isolated these factors as the discussion around the drivers

unfolds over the coming pages.

The 5 drivers of fintech success

1 Talent

2 Capital

3 Demand

4 Policy

5 Environment

1 EY: UK FinTech – On The Cutting Edge – February 2016

Drivers of success



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The 2017 Census has again underlined that the ‘people’

side of Australian fintechs remains challenging. In most

cases they are lean businesses (a median of 8

employees) operating in a highly dynamic environment

and that can place significant pressure on the leadership

of the firms. We saw that 23% nominated ‘insufficient

time available to devote to the business’ as an internal

challenge; this challenge is heightened among smaller

fintechs in part because they may have other forms of

employment outside of the start-up.

The commitment required by founders is immense and

the personal risk real, but optimism invariably abounds.

The profile of fintech leaders shows…

► 83% of fintechs are founded exclusively by males*.

► They are highly educated (32% undergraduate; 54%

postgraduate).

► Those that are founders/CEOs of fintechs have

started on average 2.1 fintech businesses.

An area of great reflection for the management of

fintech firms is the calibre of their staff and the ability to

both attract and retain good people. A number of

observations can be made about the battle for talent…

► Limited pool in Australia… Half of fintech (52%)

leaders agree that there is a lack of experienced

start-up and fintech talent in Australia. Attracting

suitable or qualified talent is one of the top internal

challenges that they face.

► Specific profiles more challenging… Of those

fintechs that struggle to attract qualified or suitable

talent, the majority struggle with finding

engineering/software expertise (61%), followed by

sales (41%) and web development (33%). This year

fintechs are finding it less challenging to attract

design/user experience talent (42% down to 24%).

However, as the industry has matured, talent pool

shortages are marginally more evident for sales

professionals (35% up to 41%) and marketing

professionals (24% up to 29%).

► Diversity a challenge… The profile of fintechs

operating in Australia shows a marked gender

imbalance, with 76% of employees being male.

Overall female participation in the fintech workforce

has largely remained unchanged from last year (22%

last year and 24% this year). FinTech Australia is

actively working to address this skew and determine

what can realistically be done to address it in the

short and longer term. To improve participation of

women in the Australian fintech industry, the top

three methods suggested by survey respondents are

encouragement to follow STEM career paths (14%);

adjusting recruiting practices (14%); and change

company culture/policies (13%).

► Referral the lynchpin… While emerging government

initiatives such as the STEM pathway and

entrepreneur visas are likely to assist in the future,

talent is mainly recruited through contacts formed by

fintech co-founders, however as fintechs mature

reliance on recruitment agencies increases.

“Founders put a great deal of effort into researching and

thinking about what they want in a new hire so they can

find the right people. They also have to be flexible with

employment arrangements - part-time, internship, etc. -

to make it less challenging to find the right people. After

4 years and a few mistakes, I now know who I am looking

for to join our business, and have confidence they will be

successful.”

Aris Allegros , Founder

Moula

1 Talent

Drivers of success

61%

41%

33%

1

2

3

Engineering/software

Sales

Web development

Talent pool shortage (top 3)

23%Nominate ‘Insufficient time to devote to the business’ as an internal challenge

Base: Have faced challenges attracting suitable talent (n=76)

83%of fintechs have all male founders

*Note – this finding is based on a new question added to the Census in 2017



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Fintech leader profile 2017

Gender

Work status

Highest level of education (fintech founders/CEOs) Number of start-ups founded/started by fintech founders/CEOs

Current role

96%Work full-time

2%Work on casual basis

2%Work part-time

1%Studying part-time

54%Post graduate

4%Vocational certificate

32%Undergraduate

10%High school

5%

40%

20%

36%

1 2 3+0

40yrs

Average founder age at inception

2.1average

55%

16%

7%

2%

5%

1

2

3

4

5

CEO

Head of afunctional area

CTO

Support role

Other

83% of fintechs have all male founders

Drivers of success

Founder

57%

Yes




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Capital is the lifeblood of start-up fintechs and a

fundamental key to success is the ability to raise funds

and then manage burn rate each month. A number of

points can be made about both the access to capital and

the management of expenditure of the funds.

► Shallow but growing pool in Australia... The funding

of start-ups is a challenging and complex issue as

they need phases of capital stretching over many

years. Venture capitalists want early stage uncapped

upside and various profiles of yield. Feedback from

the in-depth interviews with fintech leaders suggests

that the capital situation has been improving with

more inflows of venture capital coming from within

and outside Australia.

► Mixed capital raising success… Although

successfully funded fintechs outnumber those that

fail to raise capital or couldn’t raise what they

desired, this doesn’t account for organisations that

may not be in existence anymore. Views in this

Census were primarily collected from fintechs that

remain in existence so there is a skew to fintechs

that were successful in their capital raising. Fintechs

that have accessed commercial funding are more

likely to have raised the amount of capital required.

► Solid averages… Of those fintechs that indicated

they have successfully raised capital to date, on

average each has raised $4.1m. This is an increase

on what was seen in 2016 ($3.9m raised) and is

indicative of a maturing industry. Fintechs in

existence for more than three years have on average

raised $5.2m of capital to date in comparison

younger fintechs aged one year or less have raised

on average $2.1m of capital to date.

► Private funding dominates… As was seen in 2016,

most fintechs in Australia have received some

private funding (72%). Six in ten (57%) accessed

some commercial funding and on average have

raised $4.2m in capital; this is greater than the

average amount of $2.2m raised by fintechs that

exclusively accessed private funding.

► Realising profit… One in seven fintechs stated that

they are currently profitable. Of those that have not

started to realise profit, their current burn rate is on

average $115k a month. This is an increase in what

was seen last year where the burn rate was $84k

month.

► Managing burn rate… Average burn rates are

particularly high among fintechs that have received

funding and scaling up their business, with the

increased burn rate reflecting the maturing of

Australian fintechs. While nearly 30% of fintechs

have a monthly burn rate in excess of $100k, the

majority of these businesses are skewed towards

having raised in excess of $10m in capital to date

(i.e. larger, more funded fintechs). For this segment,

the remaining runway is typically more than a year,

but there is still a sizeable proportion (37%) that only

have up to a year before the cash reserves dry up.

“…the lack of cash flow gave us an opportunity to learn

how to prioritise business resource and stay creative to

make the most use of the limited cash flow; we have

been constantly thinking about how to educate and

accelerate our partners to set up quickly and acquire

customers.”

Joel Ramirez, Co-founder & General Manager,

Financials for Office 365

2 Capital

Drivers of success

14%of fintechs are currently profitable

39%Had their expectations of capital raising experience met

72%Private funding

57%Commercial funding



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At the heart of any start-up or new venture is the ability

to identify a gap in the market - a latent need that can be

met by delivering a compelling offering. However the

gaps aren’t always obvious and the solution needs to be

seen as genuine and positively differentiated in the

market.

The key insights from the Census and some broader

global research conducted by EY are…

► Fintech Adoption continues to grow… EY recently

conducted a large scale consumer study across 20

countries exploring the level of fintech adoption.

China dominates the global landscape, with adoption

still comparatively high in Australia (37%) and it has

tripled over the past two years (13% adoption in

Australia in 2015).

► A more diverse profile… The fintech industry in

Australia is maturing and broadening. There is now

greater collaboration into other sectors (e.g. Agtech)

and an improving working relationship with the

incumbent/traditional players in the financial

services industry.

► Solution-centric… The majority of fintechs believe

that the key reason that consumers or businesses

access their products/services revolves around

offering ‘more effective solutions’ to their customers.

Having a “seamless user experience” is also

fundamental, coming in second on the list of areas to

focus.

► Cost of customer acquisition and retention… While

EY’s research shows the rapidly growing usage of

fintechs, one of the core external challenges for

organisations operating in Australia is the ‘cost of

customer acquisition’. This was cited as a challenge

by one in two fintechs surveyed.

In terms of demand profile, Australia is ranked fifth out

of 20 markets around the globe; with some of the key

observations being…

► Tech-savvy younger generations are high adopters of

fintech, particularly of money transfer and payments

services, however older generations also

demonstrate high acceptance of such services.

► Australia is the fourth most developed money

transfers and payments market, and the sixth most

developed insurance Fintech market.

► Overall Fintech adoption in Australia is expected to

increase in the next 12 months from 37% to 43%.

► While adoption will continue to increase amongst

young adults, usage is expected to increase amongst

older generations who are warming to idea of

conducting financial transactions digitally.

“There are those who believe that fintechs struggle to

translate the innovation and great customer experience

that they create into real customer adoption. The EY

FinTech Adoption Index suggests that thinking is now

outdated. Fintechs are not only becoming significant

players in the financial services industry, but are also

shaping its future.”

Imran Gulamhuseinwala,

EY Global FinTech Leader

“Congratulations to the small businesses of Australia. Pin

Payments has received enthusiastic support for our

payment solutions, even whilst being a relatively new

brand to the space. Our customers recognise how we're

trying to help their day-to-day, and in return are patient

and generous with their feedback. So from our

perspective, Australia is a great market to launch a

fintech business in.”

Chris Dahl, Director,

Sales & Growth at Pin Payments

3 Demand

Drivers of success




The EY global fintech adoption index

Source: EY Fintech Adoption Indexhttp://www.ey.com/gl/en/industries/financial-services/ey-fintech-adoption-index

FinTech adoption rates across our 20 markets Comparison of FinTech adoption in six markets between 2015 and 2017

Notes: The figures show adoption rates per market for the six markets for which a comparison is available. All figures are shown in percentages.

*Belgium and Luxembourg

**Hong Kong SAR of China

Notes: The figures show FinTech users as a percentage of the digitally active population. All figures are shown in percentages.


Australia Canada Hong Kong Singapore UK US

2015 adoption 2017 adoption

37

1318

8

3229

15

23

14

42

17

33

Australia has one of the fastest growing fintech marketsAustralia’s fintech adoption rate is ranked 5th, with a 37% adoption rating

Meredith Angwin, Partner

Financial Services, Ernst & Young Services Pty Ltd, Australia

Australians are adopting fintech services and solutions quickly

and this will continue to gain momentum; we have always been

early adoptors of new technology and services that make our

lives easier and are built around what we want rather than what

a financial services incumbent thinks we want.”

37%

http://www.ey.com/gl/en/industries/financial-services/ey-fintech-adoption-index

http://www.ey.com/gl/en/industries/financial-services/ey-fintech-adoption-index



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Policy, regulation and broader government support are

fundamental dimensions in creating a healthy and

sustainable fintech ecosystem. There is a need for policy

momentum to be maintained and for there to be a

proactive fintech agenda at all levels of government. We

explored a wide range of potential growth initiatives and

those considered most effective in the eyes of Australian

fintech start-ups are listed below.

Tax tops the list

Nine in ten (87%) participants agree that the top

effective growth initiative is 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’ (85%

effective). Founders interviewed are quite positive about

the level of tax incentive support provided in the past 12

months and would like this to increase.

Access to open bank data

With open banking being under independent review in

September 2017, the anticipation of positive

recommendations for the setup of an open banking

regime in Australia is palpable.

Customer acquisition… There is strong recognition that

without open bank data, fintech start-ups will continue to

face much greater customer acquisition costs. Access to

consumer data protected within this system would

enable them to more easily identify attractive customer

segments and the likely demand for particular products.

85% of fintechs said that ‘Government mandated open

data protocols’ would be an ‘effective’ initiative to grow

and promote the industry up from 76% last year.

New payments platform… Most fintechs (82%) believe

that providing more transparent access points for

fintechs to connect to the New Payments Platform is one

of the top effective industry growth initiatives; this

reveals that fintechs are unconvinced about the ease of

access to this infrastructure.

Licensing / sandboxes

As fintech start-ups move forward with their technology

solution, ASIC licences are an important part of a go to

market strategy.

Licence uptake… Six in ten (62%) fintechs surveyed do

not currently have one of the three key ASIC licences

(financial services licence, credit license or market

infrastructure licence).

Regulatory sandboxes… Over the last 12 months, ASIC

expressed a desire to strike an appropriate balance

between encouraging innovation whilst providing an

appropriate regulatory framework for the Australian

fintech industry. At the end of 2016, ASIC launched the

regulatory sandbox framework which provides fintechs

with limited freedom to operate within set guidelines

while their product solution is in development. The

Census data indicates that only 1% of Australian fintechs

currently use an ASIC regulatory sandbox, however, a

further 9% intend to use this in the next 12 months.

“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 & CEO

Loan Dolphin

“One of our biggest challenges today is to effectively

engage and collaborate with the Government to

springboard Australian innovation. We do believe

partnering with the government is necessary but finding

the best approach for proof of concepts is still a work in

progress.”

Joanne Cooper, Founder & MD

ID Exchange

4 Policy

Drivers of success

6 EY: UK FinTech – On The Cutting Edge – February 2016

ASIC financial services license

ASIC Credit License

ASIC Market infrastructure license

Banking license

32%

11%

1%

1%

16%

6%

2%

2%Currently have

Looking to aquire

Licenses



Contact us


Introduction About the research Drivers of successThe Australian fintech landscape Future focus Contact usDrivers of success

Net effective

2017

Net effective

2016

Make the research and development tax incentive more accessible to start-ups

87% -

Government mandated open data protocols 85% 76%

Capital gains tax relief for tech start-ups first incorporated in Australia

85% 87%

Reduced taxes, such as payroll taxes, which apply when hiring employees

83% -

More transparent access points for fintechs to connect to the New Payments Platform

82% -

Removing barriers to the creation of new banking licences

81% -

An expanded and more flexible regulatory sandbox environment

78% -

A cross-industry solution to share know-your-customer and identity validation information

75% -

Easier access to skilled migration visas to be able to hire new employees

67% -

Programs and grant assistance to access the existing Government Launchpads in Tel Aviv,

Shanghai, Berlin, Singapore and San Francisco64% 64%

Opportunities to pitch for Government tenders and projects

58% 61%

Creation of more referral agreements between ASIC and Regulators in other markets

57% 66%

Creation of more Government Launchpads in other overseas markets

54% 56%

A government-supported digital sovereign currency (i.e. a Digital Australian Dollar)

40% -

60%

51%

55%

57%

42%

40%

36%

43%

34%

25%

27%

21%

15%

16%

27%

34%

30%

26%

40%

40%

42%

32%

34%

39%

31%

36%

39%

24%

11%

11%

10%

11%

14%

16%

14%

19%

23%

23%

30%

32%

32%

38%

2%

4%

5%

6%

4%

3%

8%

7%

10%

12%

13%

11%

14%

22%

Very effective Fairly effective Not very effective Not at all effective

Base: n=166 (All respondents)Q26a. How effective do you believe each of the following initiatives might be for growing and promoting the Australian fintech industry?

Potential growth initiatives

85%Government mandated open data protocols is an effective initiative to grow and promote

the industry

“We have a policy directive from the Federal Government

that innovation and fintech is important, however there is

a large gap to how this is supported by the R&D tax

incentive; clearly the current program needs a shakeup to

make it effective for start-ups.”

Stuart Stoyan, Deputy Chair and FinTech

Census Founder

FinTech Australia



Contact us


Most of the fintech start-ups are lean operations, having

relatively small numbers of staff, but a big vision. The

research has underlined the importance of strong

support networks beyond the founder, the board (if

there is one) and investors. The ability to effectively

leverage peer and industry support is imperative.

In the Census, the use of accelerators/incubators and

co-working spaces was explored with Australian fintechs.

A number of points can be made about their usage and

impact.

► The power of hubs… Accelerators and incubators are

considered an important contributor to the success

of the fintech industry in Australia by 60% of Census

participants. In comparison, last year the importance

was higher (69%) indicating that whilst hubs are

critical for support, the industry is coming out of the

nursery stage. Those in hubs experience the benefits

almost daily with planned and unplanned

conversations helping them take constructive steps

in the right direction.

► Mixed usage of co-working space… Users of hubs

describe the workplaces as a source of ideas,

experience, insights, expertise, accommodation and

support. However, they haven't cut through to all.

Just over half of fintech start-ups surveyed (55%)

have ‘never used a shared workspace’. Some of

those that embarked on their start-up journey

without the support of a hub, lamented not having

found one from which to launch their venture.

► Lower cap firms more reliant… Typical usage of co-

working spaces is more limited among fintechs that

have raised in excess of $5m of capital to date or are

greater than five years old. These businesses have

evolved toward renting their own office space and

have surpassed their initial requirements for co-

working spaces.

► High usage amongst the converted… Hubs are

accessed on average over two times a week, with

three in ten fintechs accessing these between five

and seven times a week. Frequency of usage of co-

working spaces is higher among fintechs based in

NSW which reflects that NSW is the key financial

market in Australia, housing the greatest number of

fintech hubs/co-working spaces.

► Government support is growing… In the past 12

months there has been significant activity by State

governments to create new and expanded hubs

which will accommodate fintech start-ups. This is

demonstrated by the Sydney Start-up Hub which

when open in late 2017 will accommodate some

2,500 people across a range of incubators and

accelerators over 11 floors. In Victoria, the State

Government released a tender in June 2017 for a

fintech operator to launch a dedicated fintech hub /

accelerator in the Docklands digital precinct.

Accelerators and incubators are an important contribution to the success of the fintech industry

agree

60% Neither/nor

25% disagree

15%

5 Environment

Drivers of success

“Moving into a fintech focused hub has been of massive

help. We are supported by simply being in such an

environment and surrounded by like-minded and

intelligent people who are building their own businesses.”

Matt Jones, Co-founder

Mosaic Money

“The fintech industry in Australia has moved through the

initial phase of exuberance and is now settling into a new

stage of maturity which will see consolidation of more

commercial ideas & focus on consumer & small business

problems that need to be solved at scale.”

Aris Allegros, Founder & CEO

Moula

“If we had done this independently without being part of

the ecosystem and community such as Stone and

Chalk and H2, we would not have achieved what we have

during the last two years. As a result, we were introduced

to second-tier banks who joined our platform which we

would otherwise not have been able to expand to.”

Ranin Mendis, Founder & CEO

Loan Dolphin



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Future focus




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6%

10%

20%

24%

14%

24%

Revenue decline

Nil growth

1% to 100%

101% to 300%

301% to 700%

>700%

Outlook and optimism

The challenges confronting any start-up in any industry

are recognised as being profound – and it was a

sentiment that echoed through our interviews with

fintech industry leaders. They spoke of the wide range

of potential challenges that can emerge on the journey

to having true market impact and that they can’t all be

overcome by the passion and focus of the team.

However, what has emerged in the study is that there is

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 208% on their revenue in June 2016, driven by

a cohort of 24% of fintechs that have experienced

growth in excess of 700%. Higher growth rates are also

experienced by fintechs under three years in existence,

starting from their lower bases. Revenue growth

stabilises somewhat once fintechs generate in excess of

$100k revenue a month (127% growth rate on June

2016).

The assured outlook is further emphasised when we

look at perceptions around the relative competitiveness

of fintechs in Australia…

► Internationally competitive… Two thirds (63%) of

fintechs agreed that Australian fintechs will be able

to compete internationally. Forty-five percent

agreed that Australian fintech organisations will be

able to ‘win’ against international peers.

► Local competition… There are mixed views on the

perceived quality of domestically based

organisations (34% ‘agreed’ that there is a lack of

quality fintechs in Australia; while 38% disagreed).

There is a positive outlook in the industry, founded on a

belief that there is a competitive advantage for

Australia fintechs. The three key elements of this

potential competitive advantage are considered to be…

► Regulatory environment… Australia’s sophisticated

and trusted regulation of financial services provides

a solid foundation for the development of 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 to

develop their export solutions – particularly in the

Asia Pacific region and proximity to capital sources

from major Asian centres such as China.

Annual revenue growth %

Median post revenue growth

Future focus

Base: Companies in post-revenue stage excluding ‘prefer not to say’ (n=49)

Revenue in June 2017 compared to June 2016

June 2017 vs. June 2016

208%

“The disruption of financial services is most likely to come

from digital giants from developing markets such as China

or even those technology giants from the US who are

extending their platform dominance into financial

services. In the face of this, many local fintech start-ups

are likely to be acquired by either global players or local

incumbents and should be preparing for that possibility by

keeping in close contact with potential acquirers.”

Simon Cant, Chair

FinTech Australia



Contact us


Global reach

Each major fintech centre around the world has its own

unique dynamics – creating both opportunities and

boundaries for those domiciled in each location. These

are defined and influenced by a wide range of factors

that predominately revolve around the five ecosystem

pillars. Some fintechs operate within these parameters,

seeing themselves as more domestic or regionally

oriented solutions, others have international aspirations

(if not current presence).

The Australian landscape is acknowledged as unique, as

many of the fintechs operating here need to do so within

a heavily regulated environment. They also have the

challenges relating to talent, capital, demand, policy and

environment.

These ‘constraints’ are real and need to be recognised,

but it was also interesting that several leading industry

commentators felt the Australian fintechs could be more

globally ambitious. This was not intended as a criticism

per se, more a recognition of the calibre of the

proposition and the potential to cross borders. It was felt

that other international hubs, like the UK, are perhaps

more geared to driving globally-scaled disruptive

innovation. It’s a point that will no doubt provoke

considerable discussion and debate and that is, in itself,

important for the industry.

Regardless of the perception and the belief that some

fintechs could be more globally assertive, there is

significant pending focus across borders. More fintechs

are intending to “Expand or expand further overseas” in

the next 12 months; this has increased from 38% to 54%

of fintechs this year. Among the fintechs that are

looking to expand, the top three markets for expansion

are the United Kingdom (49%), Singapore (40%) and the

United States (38%).

From the Australian fintechs who have already ventured

beyond our shores, their advice is consistent;

Among fintechs that are not considering

expanding/expanding further overseas reasons include

business plan is currently focusing on the local market

growth (67%), followed by lack of time to investigate

potential overseas markets (22%).

“Start-ups know that expanding beyond Australia’s

borders will lead to a significant increase in customers

and investors, which is why they believe they need to

solve problems for people globally. It takes a creative

idea and solution, but it also requires effective strategic

execution of the idea, along with a global network and

community to help tap into local regulatory knowledge.”

Danielle Szetho , CEO

FinTech Australia

“Incumbent institutions struggle to imagine the rules are

changing and their old business models are not

sustainable. To keep up with the shift, they need to quickly

find new value chains that are inclusive of the customer.

This will be vital to their political and financial future.”

Future focus

Future outlook

38%

2016Expand/expand

further overseas 54%

2017

Don’t go it alone, you need to form trusted

partnerships in your target markets and

work with those who understand the

cultural and consumer norms.”

Don’t underestimate the licencing

challenges in each and every market; be

prepared for this to take considerable

time, patience and resources.” Katryna Dow, Founder & CEO

Meeco

“I am delighted to see the increase in Australian fintech

firms that are setting global goals for their businesses.

More than half are now focused on expanding overseas

in the next year. Supporting these creative start-ups is a

major focus of Austrade, especially through our ‘Landing

Pads’ program in five global innovation hubs, which is

already propelling many clever Australian businesses to

new heights.”

Stephanie Fahey, CEO

Austrade



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An effective ecosystem

In the fintech sector in Australia, optimism abounds,

however there is an undercurrent of realism in the

community and amongst astute observers that tempers

the enthusiasm. There is recognition that while

Australian start-ups are progressive and agile, to truly

succeed they will require significantly more support.

While there are many strengths, Australia doesn't have

the financial services scale, capital for investment or

tech industry presence of some global peers. In that

context, the need to create the most effective

ecosystem to foster and support growth is all the more

important.

As outlined in this report and supported by broader

global EY analysis, the most effective ecosystem is one

that has five pillars – talent, capital, demand, policy and

environment. This research plays a pivotal role in

helping to give life to the ecosystem as it not only

profiles and defines the fintech start-ups, but provides

insight into how they are performing and what is

required across each of these dimensions.

The research has shown that there is a buoyant and

vibrant fintech industry in Australia that is increasingly

mature. It has also affirmed that there is no doubt

Australia is regarded as a tier one fintech nation and the

potential for success is profound. However, what we

have also seen through this study and others conducted

by EY is that the gulf between the leading nations (and

cities) and those left in their wake will become greater as

fintech solutions are embraced in the mainstream. Time

is tighter than may be assumed.

“Australia’s 600-odd fintechs now employ over 5,000

people, are growing at over 200% per annum and are

raising serious amounts of capital. Combined with the

strong support from Federal and State governments

and corporate partners, we have now reached a

tipping point where there is enough maturity in

Australian fintech to enable a robust eco-system.

We’re not there yet, but the foundation is built for

Australia to take a leading regional role in fintech.”

Stuart Stoyan, Deputy Chair

and FinTech Census Founder

FinTech Australia

Future focus



Contact us

Census participants*

* Note – Fintech participants listed above specifically provided their permission to be cited in this report

Future focus

Acceleration Venture Catalysts CoinJar FlyFree.ly Map My Plan Peer Estate SmartFee

Advice RegTech Credit Savvy Frollo Meeco Pelikin SocietyOne Holdings Pty Ltd

Adviser Network CrowdfundUP FundingPro Metamako Picture Wealth Pty Ltd Spotcap Australia

Adviser Ratings CXi Software Get a Better Rate MoneyPlace Financial Mappers Study Loans

AgriDigital DigitalX GiftInvestor Moneysoft Plenty Surefire Systems Pty Ltd

AIRSCAPE DirectMoney H2 Ventures Moneytech PractiFI Tappr

Airwallex Douugh Imperium markets Moneytree PrimaryMarkets Tempus Adventus

Apex Capital Partners Ducksoup INAMO Moroku Promis Network Pty Ltd The Change Compass

Astute Wealth Advice Pty Ltd e4 Australia InfraRisk Mosaic Money Pty Ltd Prospa The Currency Shop

Audeamus Risk Edstart Instarem Pty Ltd myadvisor.ai Proviso The Invoice Market

BankVault EFTlab Investment Control Systems MyFiziq Limited Quantifeed ThinCats

BetaSmartz Equitise Investum Neu.Capital QuietGrowth Trade Ledger Pty Ltd

Beyond Merchant Capital Estate Baron InvoiceInterchange New Arenas Capital QxBranch Upcoming Floats

Bigstone Capital Pty Limited Expense Check InvoiceX On Deck Capital Australia Pty Ltd Red Marker Valiant Finance Pty Ltd

Bit Trade Australia Pty Ltd Ezidox Pty Ltd iSignthis Ltd OneCheck Pty Ltd Reinventure Verrency

Bravura Solutions Limited Fabric iungo OnMarket BookBuilds Round Table Apps Waddle

The Brick Exchange Fair Go Finance Jelix Ventures Open Orbit RoyalPay WealthNation

Carrots Money Fin15 Joust Open Sparkz SavR International Payment and Transaction Monitoring Association (IPTMA)CashRemit Pty Ltd Financial Mappers (Plencore

Wealth Ltd)Kikka Capital Optimo Financial Pty Ltd SelfWealth

CCFS Likwidity OurMoneyMarket ShareEquity Zip Money

Claim Central Consolidated Finhaus Labs Link4 Australia PayDock Sidekick Industries

Cloud Insurance FirstStep Investments Australia Living Room of Satoshi Paypont Australia Six Park

Cloudcase Software Solutions Flash FX Mafematica Payreq Skippr Cash Flow

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EY Sweeney

Marc L’Huillier

Partner

Ernst & Young, Australia

[email protected]

Lewis Jones

Director - Melbourne


[email protected]

Aditi Kane

Manager


[email protected]

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Professional advice should be sought prior to any action being taken in

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Rowan Macdonald

Partner Financial Services


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Meredith Angwin



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Olivia Willee



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Marla Heller



[email protected]

FinTech Australia

Danielle Szetho

FinTech Australia CEO

[email protected]

Simon Cant

FinTech Australia Chair

[email protected]

Stuart Stoyan

FinTech Australia Deputy Chair and

FinTech Census Founder

[email protected]

Mark Skelsey

FinTech Australia, Director of PR and

Communications

[email protected]

@ausfintech (twitter)

http://www.fintechaustralia.org.au

mailto:[email protected]

Documents

EY FinTech Australia Census 2017 FinTech Australia... · Introduction About the research The Australian fintech landscape Drivers of success Future focus EY FinTech Australia Census