In August, Melbourne-based founder of peer-to-peer lending startup MoneyPlace launched the Fintech Census, an independent non-invasive 17-question survey, aimed at establishing a collective voice before developing of a comprehensive fintech vision and strategy for Melbourne (and Victoria more broadly). A total of 52 companies participated in the survey, representing more than 500 people working in fintech.
The results of the survey reveal the biggest challenge for local fintech companies is finding talent, with 60 percent having five employees or less. This is closely followed by access to and availability of private funding – about 85 percent of Victoria’s fintech companies are funded by founders themselves, with about a quarter also receiving external funding.
A significant internal challenge for the fintech companies is acquiring customers, with many indicating that greater access to private and public enterprises, their customer bases and distribution networks would be helpful.
The survey results also suggest a yearning for a dedicated fintech coworking space in Melbourne, similar to Sydney’s Stone & Chalk and Tyro. At the moment, only 15 percent of the companies surveyed are working out of a coworking space full-time and about 19 percent are coworking part-time. The remaining 65 percent are not coworking at all.
In a previous interview with Startup Daily, Stoyan, who is personally familiar with the unique challenges fintech companies face, said the reason why fintech startups need a dedicated fintech space is because they have different needs to other startups. For example, working in an open plan environment is not necessarily appropriate for fintech startups that have to take customer privacy into account and protect sensitive information.
“There are privacy considerations for fintechs. If you’ve got customer data, that’s confidential, so working in a completely open plan environment is not appropriate,” Stoyan said.
He also pointed out that fintech startups need access to networks that are fintech focused, whether it’s introduction to partners from financial institutions or access to accounting or legal professionals that specialise in obtaining financial services licenses.
“The ability to have specific advice around fintech and being able to talk to other startups who have gone through that experience is important … At the moment, support infrastructure is not there for fintechs in Melbourne,” Stoyan said in August.
Prior to launching the survey, Stoyan was concerned that, while there are many innovative startups emerging from Melbourne solving problems in areas like payments/billing, personal finance/asset management and lending, the city was lagging behind Sydney and international cities like London and Singapore, due to lack of coordination around fintech. The respondents of the survey agreed with this view, saying the support mechanisms in the city are poor.
Stoyan suggested that governments, corporates, regulators and other industry stakeholders need to support fintech through a strong alignment of activity and investment.
According to the Fintech Census report, the general consensus is that the government should support Victorian fintechs by creating more favourable conditions and foster an ecosystem for fintech startups, corporates and government to connect and collaborate.
Stoyan told Startup Daily previously that the reason the Victorian government has not acted after announcing it had allocated $60 million for startups is because they’re unclear about who they’re acting for. Now that the survey results are out, the next steps can be taken, starting with focused policy discussions with Victorian fintech startups.
In the last year or two, Sydney has been strengthening its position as Australia’s financial services powerhouse with the emergence of fintech-focused coworking hubs, venture capital firms and accelerator programmes. According to a study commissioned by KPMG, Sydney’s financial services sector produces 5 percent of Australia’s GDP – more than half of Australia’s financial services industry as a whole.
Between 2013 and 2014, the financial services industry contributed the highest share of sector value to the national economy (9 percent or AU$130 billion), making it Australia’s largest sector, bigger than mining and manufacturing. Both major sides of government are realising fintech’s potential to drive Australia’s economy forward, but fintechs in all cities need the conditions and support structures to be able to do so.
“There has been some great efforts to establish Sydney’s fintech community. We need these efforts to be replicated in Melbourne, so that a robust national fintech ecosystem can ensure Australian fintech remains relevant in a regional and global context,” said Stoyan.
Stoyan told Startup Daily he is actively engaging with the government, at both State and Federal levels, about using the survey results as a guide to identifying and developing solutions to high-priority problems.
“We see this as one of the first steps towards establishing a stronger infrastructure for startups, specifically fintechs, in Melbourne,” said Stoyan.
“The clear finding were that fintechs want more support to attract talent and customers; and this is a key part of talks. The second is the demand for a dedicated fintech hub in Melbourne which I am strongly advocating for and believe will give local entrepreneurs much needed support.”
“It is a huge step forward to have a clear idea of the challenges facing startups in Melbourne and a path forward to take to governments and others.”
The Fintech Census revealed mixed views on regulation, with 50 percent of the participating companies saying regulation levels are ‘just right’ and 40 percent saying there’s too much regulation.
It’s well-known within the community that fintech businesses typically take longer to set up due to regulatory and structural complexities.
“Licensing takes a significant period of time. What fintechs are looking for is support through that process to make that process as efficient as possible, and also support in getting to that process. For example, having corporate partners or a government partner that provides a free coworking space would mean fintechs don’t incur costs while waiting for a license. Initiatives like that is more likely to encourage people to make the jump from a corporate role into fintech,” Stoyan said in an interview in August.
He did, however, praise ASIC’s John Price, Mark Adams and Deborah Ralston for their efforts in creating an online hub with tailored content for fintech businesses.
“[ASIC] recognises that as a regulator they need to engage differently with fintechs because they’re a different type of entity. The [Innovation Hub] has become a great way to accelerate fintechs to market, but once you’re in market, how do you form partnerships? There needs to be a way to make it easier to engage with somebody in one of the big four banks. There are 30,000 people working in the banks, so how are you to know who to speak to?” said Stoyan.
“It’s not just about making it easier for fintechs, it’s also about making it easier for corporates and government to engage with fintechs as well.”
On Thursday night, Stoyan will also be presenting the results to Melbourne’s fintech community and ASIC’s John Price at the Fintech Meetup, so Stoyan is certainly pushing the issue towards action.
“As a community we believe Melbourne is the best place for our businesses and want a springboard that will help elevate us to global levels.”
While Stoyan is currently focusing on the interests of Melbourne fintechs, he is open to the prospect of evolving the initiative into a fintech-focused national industry association that gives the sector a unified public voice.
“There is a great opportunity for fintech, not just in Melbourne, but across Australia given the right support,” he said.
A majority of the companies surveyed (75 percent) are in their post-launch phase and under two years old with less than 10 employees. Almost half (48 percent) of the companies are post-revenue, though 38 percent are in pre-launch or concept stage.
Melbourne’s CBD unsurprisingly has the highest density of fintech startups (75 percent), with the remainder located in Melbourne suburbs (21 percent) and regional Victoria (4 percent).
Half of all fintech companies are launched by people in their 30s, with 37 percent aged 40 or older and 14 percent in their 20s.
One of the most alarming statistics to come out of the Fintech Census is that only 10 percent of Melbourne fintech founders are women.
Featured image: Stuart Stoyan. Source: Provided.