FinTech Australia, the industry advocacy body, is calling for the Australian government to intervene after finding that many smaller fintech firms are struggling to get off the ground.
After KPMG detailed a 14 per cent decline in the number of deals in the second half of 2024, FinTech Australia is urging the government to recalibrate its Research and Development tax incentives and the Early Stage Venture Capital Limited Partnership (ESVCLP) programme to buffer fickle investment trends for newer fintechs in Australia’s ecosystem.
While newer, smaller fintechs increasingly struggle to secure investment, the more established, larger firms are still able to do so.
“Australia is at risk of creating a two-speed fintech ecosystem,” explained Rehan D’Almeida, CEO of FinTech Australia. “One where larger players continue to grow, but smaller newer companies, that could become our next Afterpay or Up Bank, struggle to get off the ground.
“We’re seeing this play out across the available funding data. While it’s taking more time, more established fintechs are still securing funding. Meanwhile, early-stage fintechs — many of whom are flying under the radar — are struggling to find investment. This is where government intervention can have the greatest impact.”
D’Almeida says that the trend is “especially concerning” as new innovative fintechs are beginning to unveil new ways to improve financial literacy and competition in Australia.
“We continue to hear reports from founders that Australia’s R&D tax incentive system is too complex and too time-consuming for early-stage founders,” he added. “The Government’s Strategic Examination of Research and Development, announced as part of the 2024-25 Budget is an opportunity to change this for the better.”
Funding’s the word
FinTech Australia is also calling for a number of key initiatives, which it hopes will bolster the growth of the local fintech industry. Its recommendations include continuing funding support for the CDR rollout, to build on the $88.8million allocated as part of the 2023-24 Federal Budget.
It also suggests the government put an allocation of funding towards supporting green fintech initiatives aimed at supporting Corporate Australia and the Federal Government’s increased focus on sustainability practices.
A need for funding emerged as a strong theme, as FinTech Australia also called for the government to ensure peak regulators including ASIC, APRA, the ACCC and AUSTRAC receive adequate funding in line with their expanding mandates as the fintech ecosystem grows.
Finally, the advocacy body also recommended a refocus on fintech as a key international export, with a call to renew the sector’s partnership with Austrade, alongside an ‘urgent review’ of the Enhanced Regulatory Sandbox to ensure it’s fit for purpose.
D’Almieda concluded: “With ongoing uncertainty abroad, now is the best time to focus on our strengths and reinforce our fintech ecosystem with the correct policy settings. Australia is a leading country for fintech. Many of the financial technologies we use daily in Australia are not available in other developed countries. With a refreshed focus on the sector it could become a vital export for our country.”
