Australia’s fintech sector faces a significant challenge accessing capital in the uncertain economic environment, a new survey of the sector found.
The latest EY FinTech Australia Census, released yesterday, shows that competition for talent in the midst of a skills shortage is another of the sector’s challenges.
Investors interviewed for the report said they were hesitant to provide more funding to the sector, especially in cases where large amounts of funding are sought.
Twenty-nine per cent of fintechs surveyed said they failed to meet their capital raising expectations over the past 12 months. This is up from 18 per cent that failed to meet expectations in last year’s survey.
Fewer said they met their capital raising expectations than last year – 54 per cent compared with 61 per cent in 2021.
Fintechs with “longer runways and a clear path to profit” are more likely to attract funding. There is good news on this front, with 78 per cent of fintechs surveyed reporting that they are earning revenue (up from 71 per cent last year).
Founders provided more than half the capital invested (54 per cent), with venture capitalists accounting for 33 per cent, angel investors 32 per cent and strategic corporate investors 29 per cent.
With capital harder to come by, the report highlighted the importance of government support through R&D tax incentives. Survey respondents called on the government to increase its support by making R&D tax incentives more accessible and adding other incentives, such as concessional loans and grants.
Talent is scarce. Sixty-eight per cent of fintechs said rising salaries were a challenge.
The biggest fintech sector in Australia is “payments, wallets and supply chain”, followed by lending.
According to the report, payments wallets and supply chain fintechs are still attracting capital, with 21 per cent of companies in the sector raising more than $100 million over the past 12 months.