FinTech Australia is calling for an urgent recalibration of Research and Development tax incentives and the Early Stage Venture Capital Limited Partnership (ESVCLP) Program to buffer fickle investment trends for newer fintechs in Australia’s ecosystem.
Recent data from KPMG’s Pulse of FinTech Report has underscored the need for action. It revealed a 14% decline in the number of deals in the second half of 2024, with a concentration of funding in larger businesses.
The call comes as part of the peak body’s Pre-Budget Submission (attached), a document communicating focus areas for the fintech ecosystem’s engagement with the government going into the Federal Budget.
Rehan D’Almeida, CEO, FinTech Australia said: “Australia is at risk of creating a two-speed fintech ecosystem. 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.”
“This is especially concerning as the sector embraces AI, and early, innovative fintechs are beginning to find new opportunities 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. 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.”
In addition, FinTech Australia called for a number of other key initiatives including:
Continued funding support for the CDR rollout, building on the $88.8 million allocated as part of the 2023-24 Federal Budget.
Work towards delivering on the Federal Government’s long-term vision of a robust and united digital economy, by simplifying overlapping compliance frameworks managed by multiple agencies.
A refocus on fintech as a key international export, with a call to renew the sector’s partnership with Austrade.
An urgent review of the Enhanced Regulatory Sandbox to ensure it’s fit for purpose.
An allocation of funding towards supporting green fintech initiatives aimed at supporting Corporate Australia and the Federal Government’s increased focus on sustainability practices.
Adequate funding of peak regulators including ASIC, APRA, the ACCC and AUSTRAC to manage their expanding mandates in line with the growth of the fintech ecosystem.
D’Almieda added: “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.”