Limited local capital and complex regulatory hurdles are increasingly tempting local financial services startups to focus their efforts offshore. 

A recent survey of 126 local fintechs conducted by EY and FinTech Australia found half were now generating revenue overseas, up from 40% in 2022, as the macroeconomic environment makes attracting funding more difficult locally. 

The annual “census” found 41% of fintechs had not met their capital raising expectations in the past 12 months, up from 29% in 2022, and 57% of founders were using their own funds. 

FinTech Australia GM Rehan D’Almeida says the sector is at a "critical inflection point where we are either going to see the ecosystem spring up or spiral down”.  

“The challenging investor landscape and a lack of new entrants highlight an urgent need for renewed government focus and support from visionary investors,” he said.   

“It is crucial we keep our best and brightest fintechs focused on Australia to empower our nation’s continued economic vitality.”  

Just 3% of fintechs surveyed were one year or younger, compared with 10% in 2022, suggesting start-ups may be facing significantly higher barriers to entry. The proportion of fintechs who agreed the Australian environment is conducive to growth fell to 50%, down from 59% in 2022, and 75% said investors are risk averse. 

Founders are increasingly looking offshore for capital and growth, and the Census found regulation, size of market, financial sector strength, and the cost of compliance are the top factors considered. 

EY Oceania Fintech Leader Malia Forner says immediate changes are required to make Australia a more attractive environment to start and grow a business, and the government can play an important role as a “multiplier” for the sector.  

Trends such as embedded fintech will increasingly drive economic growth, Ms Forner says, and the government should use incentives and grants to expand and attract domestic and foreign investments, and maintain stable regulations to build Australia as a regional financial hub. 

“The case is strong for concerted action to support the sector. We can’t afford to let this important growth sector fall behind other global financial hubs just as it is about to move to the next level.”