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Navigating the Transformative Journey: Australian Fintech in 2023



The Australian fintech sector has traversed a challenging path over the past year, as depicted in the recent KPMG Australian Fintech Survey Report 2023. The findings revealed a sector grappling with adversity: both total investment and the number of deals witnessed a substantial drop compared to the previous year, resulting in a 3% decline in the total number of Australian fintech startups, now standing at 830.

Capital raising emerged as the top challenge for 29% of fintechs, closely followed by customer acquisition (22%), resourcing (22%), and revenue contraction (14%). However, amid these difficulties, only 16% of fintechs reported a reduction in total headcount in the past year. Encouragingly, 83% of fintechs expressed their intent to hire new staff in the upcoming 12 months, reflecting resilience and a commitment to growth in the face of adversity.

The report identifies several key trends shaping the Australian fintech landscape:

  1. Subdued Growth: The uncertain economic conditions are expected to yield moderate growth or even decline in the sector.
  2. Innovation Potential: Despite challenges, there is ample scope for innovative capabilities, particularly in payment innovations driven by Australia's New Payments Platform and pandemic-induced shifts in consumer behavior.
  3. Rationalisation and Consolidation: A phase of rationalisation and consolidation is anticipated, especially in areas with excessive competition or where achieving scale is crucial for profitability.
  4. Concentration in Major Metros: An overwhelming 83% of fintech respondents are based in NSW and Victoria, leveraging talent pools and proximity to global technology and financial services firms.
  5. Reliance on Overseas IT Talent: While Australian fintechs leverage overseas talent for software and engineering, a preference exists for local talent in critical functions like R&D, Finance, and HR.
  6. Strong Hiring Intentions: Despite challenges in recruiting local talent, the majority of respondents plan to hire in Australia, prioritising roles in software development, sales, and marketing.
  7. AI's Increasing Role: AI is becoming pivotal, especially in successful RegTech vendors, aiding in automating manual tasks for risk and compliance teams.
  8. Anglosphere Predominance: Fintech firms operating overseas predominantly conduct business in developed English-speaking countries with similar regulatory frameworks.

Daniel Teper, Partner, Mergers & Acquisitions and Head of Fintech (Australia) at KPMG Australia, acknowledged that prevailing market conditions had necessitated the fintech sector's consolidation, compelling ventures to reassess risk profiles and growth strategies. Despite these challenges, he expressed optimism that as pressures ease, investors will once again focus on growth investments, allowing fintechs to redirect their attention to innovation and expansive growth.

In this complex landscape, startup legal firms such as Allied Legal play a pivotal role in aiding Australian fintech startups:

  1. Regulatory Compliance and Guidance: These firms provide invaluable guidance on navigating complex regulatory landscapes, ensuring startups remain compliant with evolving laws and licenses governing financial technology, thus avoiding legal pitfalls and regulatory hurdles.
  2. Structuring and Documentation: Legal experts aid in structuring businesses effectively, from setting up the right business entity to drafting agreements, ensuring clarity and transparency in operations.
  3. Fundraising and Investment: Proficient legal firms offer guidance throughout fundraising processes, drafting investment agreements and ensuring compliance with securities laws to secure funding while safeguarding interests.
  4. Intellectual Property Protection: They assist in identifying, securing, and defending IP rights, safeguarding innovative ideas, software, and technology.
  5. Employment and Talent Acquisition: Legal support in drafting contracts and structuring employee equity programs ensures compliance with employment laws.
  6. Risk Management and Compliance Solutions: These firms help develop robust risk management frameworks and compliance solutions to mitigate legal risks and navigate cybersecurity challenges.
  7. Dispute Resolution and Litigation: In conflicts, legal experts provide mediation or represent startups in litigation, seeking optimal resolutions and protecting interests.
  8. Advisory Services for Expansion and Mergers: They offer strategic advice on expansion, mergers, or acquisitions, navigating legal complexities for smooth transitions.

Collaborating with startup legal firms versed in fintech intricacies can be transformative for Australian fintech startups. Allied Legal expertise ensures compliance and provides vital legal support for growth, innovation, and sustained success in a competitive landscape, facilitating a resilient journey forward for the sector.

Seeking expert legal support for your fintech venture in navigating regulatory challenges, fundraising, intellectual property, and more? Contact Allied Legal for legal guidance and solutions tailored to the evolving landscape of the fintech industry at 03 8691 3111 or email us at hello@alliedlegal.com.au.


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