Australia’s flourishing fintech sector sees an opportunity to make further inroads as their long-established rivals focus on overcoming the misconduct issues uncovered by the Hayne royal commission.

Fintech leaders believe the royal commission outcome will be a “net positive” for them, according to the annual EY FinTech Australia Census report.

“The negative sentiment and disapproval in the community is real,” the report says. “As consumers have learned of the misconduct and poor treatment of often loyal customers, their level of cynicism has deepened.

“The sense is that the trust deficit creates an opening for fintechs, with the challenge to ensure that their brand is seen as separate from [that of] the incumbents.”

However, the royal commission’s final report in February will provide the best indication of what lies ahead as far as the regulatory landscape is concerned.

If the interim report is any guide, the financial services sector is set to face tighter scrutiny and that may impact fintechs as well as incumbents.

“The big question mark for a lot of startups is, what is the end outcome and how will the regulatory environment change?,” FinTech Australia Chairman Alan Tsen told insuranceNEWS.com.au.

“One could imagine a scenario where the regulatory environment tightens up quite considerably as a result of the royal commission.

“We hope obviously that doesn’t happen but at the same time it’s pretty clear from the royal commission that there needs to be a change in the way financial services are delivered by incumbent providers.”

In the short-to-medium term at least, the trust card is in the fintechs’ favour.

“On the trust side, there are going to be opportunities, but again I am very cautious in predicting the future because we don’t know what the end outcome will be around the regulatory landscape. That is going to be very important,” Mr Tsen said.

Peer-to-peer insurer Friendsurance Australia CEO Perry Abbott says regulations are only effective if the net result is increased competition.

“Competition is the best natural regulator to produce the best outcomes for consumers,” he told insuranceNEWS.com.au.

“If you want a fair go for consumers, you need to take some regulatory steps to let other people have a reasonable chance of playing in the landscape.

“I don’t see any other solution apart from some sort of regulatory intervention to create a level playing field for more people to enter and grow the market.”

Results from the third census report by Fintech Australia and consulting group EY Australia suggest the fintech sector, which includes insurtechs, are growing in strength.

About 19% say they are profitable, up from 14% last year, and median revenue growth is up 2.25 times.

The proportion of fintechs three years or older has increased to 43% from 31% last year and 20% in 2016.

Within the insurtech space, start-ups’ average age is about three years and 24% have raised more than $2 million in capital.

Insurtechs now make up 11% of the fintech sector, up from 5% last year.

“Much of what is happening in the insurtech landscape is actually enabling the future of insurance, rather than disrupting the sector,” the report says. “Insurtechs are working with incumbent insurance players to challenge and test all parts of the insurance value chain.”

The research was conducted between August and September and involved 151 online surveys and 12 interviews with fintech leaders in Sydney and Melbourne.

Click here to see the full report.