Key findings from the 2022 EY FinTech Australia Census
Warning signs in the capital raising environment
The last 12 months saw a steady level of successful fintech capital raised, with 45% of respondents raising more than $10 million (44% in 2021).
But the proportion of fintechs exceeding their capital raising requirements decreased, from 21% in 2021 to 17% this year.
Payments, wallets and supply chain fintechs were most successful, with 21% of this segment raising more than $100 million, compared to the 13% sector average.
Outside of founder funding (54%), capital raising was largely from venture capitalists (33%), angel investors (32%) and strategic corporate investors (29%).
However, interest in and use of alternative funding sources is also increasing, with one in five (20%) fintechs citing government grants, including the R&D tax incentive, as a source of funding this year.
Attracting and retaining talent remains a top priority
Fintechs said the top three challenges or inhibitors to attracting and retaining talent are rising employee salaries (66%), access to skilled domestic workers (58%) and competition from big tech (52%).
Consistent with 2021, the scarcest areas of talent across the industry remain engineering/software (66%), data engineer/data scientist (40%), product management (29%) and sales (29%).
Fintechs largely encourage remote or hybrid working models. While the vast majority (87%) of fintechs have a physical office location, only 8% support purely office-based work.
ESG considerations and diversity identified as areas for improvement
Only 30% of fintechs currently measure their business sustainability or carbon footprint, only 19% have a sustainability goal and only 27% have implemented some sustainable business practices.
Female representation remains stable but low at all levels: 34% in the sector (35% in 2021), 28% in leadership (26% in 2021), 28% of founders (24% in 2021) and 25% of advisory board members (23% in 2021).
Culturally and linguistically diverse (CALD) participation in the fintech workforce is increasing, but remains low at 28% (versus 25% in 2021).
R&D tax incentive still crucial lifeline for the industry
79% of fintechs say the R&D tax incentive improves the sustainability or growth of their business and 72% say it encourages onshore operations.
Similar to the 2021 Census, half (51%) of fintechs surveyed have either successfully applied for the R&D tax incentive or are in the process of applying, with 43% being successful applicants in the past two years at the time of census close.
Yet, 64% of fintechs are either not confident, or only somewhat confident that they understand the incentive’s eligibility criteria, indicating the need for more clarity and engagement.
Meanwhile, the Export Market Development Grant (EMDG) continues to have a very limited reach within the sector. Only 8% of respondents say they have received the grant in the past, and 8% intend to apply for it in FY23.
Confidence falls on international expansion plans
The percentage of respondents who believe Australian fintechs are internationally competitive fell to 69% from 80%, putting the sector’s confidence almost back to 2019 levels.
Confidence that Australian fintechs can win against international fintechs also fell to 57% from 67% in 2021.
Despite this perception though, the percentage of Australian fintechs generating revenue from overseas remains steady (at 40%) and, of those, 43% earn almost half of their revenue from overseas sales.
For the fintechs planning overseas expansion in the next three years, the US, UK and New Zealand remain the top three most attractive markets. With Singapore in fourth position, Canada has now consolidated its position in the list to be the fifth most popular expansion destination, with fintechs beginning to see greater opportunity there.
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About the EY FinTech Australia Census 2022
This year’s Census is based on an online survey of 149 fintechs across Australia, as well as a series of qualitative interviews with fintech leaders and the leaders of innovation functions within major Australian financial services organisations, conducted between July and September 2022. It is a collaboration between Ernst & Young, Australia (EY), and FinTech Australia, supported by Austrade and Visa.