Fintech start-ups are struggling with barriers to entry that are significantly higher than they were 12 months ago, a new report reveals.
According to the latest EY FinTech Australian Census, just 3 per cent of the fintechs identified in the survey are one year or younger, compared with 10 per cent in 2022.
Many traditional sources of funding dried up over the past year, as investors became more risk averse.
This left start-ups to explore other sources of capital, such as crowd funding, non-bank lending and finance from other fintechs. More than half the businesses surveyed (57 per cent) said they were “founder funded”.
The survey also found that more mature fintechs were not able to raise enough capital to meet their funding needs. While total capital raising was consistent year-on-year, 41 per cent of businesses said they did not meet their capital raising expectations, compared with 29 per cent in 2022.
Fifty per cent of businesses said the current environment is “conducive to growth”, compared with 59 per cent last year.
In an environment of rising costs and reduced funding options, many companies reported that their focus has turned to operational efficiency and exiting non-core business – not what you usually hear from growth-oriented fintechs.
The main areas of activity of Australian fintechs are payments and digital wallets, lending, data and information management, business tools and wealth and investment.
Fintechs said their investment priorities for the coming year include machine learning, cybersecurity, cloud systems and mobile applications.
On the positive side, 88 per cent of companies said they were “post-revenue” – the highest level recorded in the eight surveys to date.