How Australian fintechs are planning to emerge stronger from the crisis

• Policy enhancements – If Australia is to be globally competitive, the fintech sector needs appropriate policy, regulation and broader government support to put our ecosystem on the global investment and talent radar. Top of the agenda for fintech founders are making the R&D tax incentive more accessible* and introducing measures to support early stage fintechs and more broadly, technology startups such as those already successful in the UK and Europe.
• Fewer barriers to Open Banking – Fintech founders believe the current pace of Consumer Data Rights implementation is too slow to support fintech innovation and fear the system is being designed to support the major players. However, they remain positive overall towards the initiative. To encourage smaller players into the market, they recommend streamlining the complex and costly accreditation process, with a tiered system so those with scale can support smaller players. The ability to access the scheme via a third party intermediary is viewed by many as an necessary step. 

• Continued regulatory engagement – The fintech community appreciates Australia’s mature and well-regulated financial system but wishes the pace of change could be quicker. Engaging with regulators has become increasingly productive, with ASIC’s innovation hub being most effective at communicating with fintechs and providing informal guidance. The industry is highly positive about the new, enhanced regulatory sandbox, which allows a broader range of financial services and credit activities to be tested for a longer period.

• Digital ID framework – Fintechs are highly supportive of Australia adopting a Digital ID framework, similar to those already being implemented in Asia and Europe. Almost three in five Census respondents believe a Digital ID would deliver cost savings to their organisation – an average of $124,700 per annum, including those with no savings expected.

Australia’s fintech industry is among the world’s most important fintech ecosystems. Now in its fifth year, this Census is recognised as the best source document defining the industry’s overall shape and tracking its progress. This year, despite the pandemic and issues with access to capital, the Census finds the industry continuing to grow and envisioning a future where fintech becomes Australia’s innovation infrastructure.   

The data and analysis expressed in this report were produced by EY Financial Services team with the research program designed and run by EY’s dedicated market research practice, EY Sweeney.  The quantitative research consisted of 111 online surveys conducted in July – August with those in the fintech industry.  Also 10 in-depth interviews were conducted with fintech leaders and leaders of innovation functions within major Australian financial services organisations. 

* The Federal Budget handed down on 6th October contained significant changes to the R&D tax incentive scheme with commitments to additional funding, removing the refund cap for small companies (<$20M turnover) and substantially increased the refundable R&D tax offset. This was heartily welcomed by the fintech industry. All changes will be implemented from 1 July 2021.