Article written by Dexter Cousins

Australian Fintech - The Journey Ahead

Last week was a MASSIVE week for the Australian Fintech Industry.

Intersekt 2022 was bigger and better than ever. Two days of conversations, insights, friendships being formed and connections being made. Along with lots of reunions, laughs, hugs and parties!

Almost 1000 people attended the sell-out event in what was a defining moment for the Fintech industry in Australia.

Tier One People founder Dexter Cousins shares his thoughts on where Australian Fintech is headed in this opinion piece.

I had hundreds of conversations at Intersekt, if you came up and said ‘hi’ thanks so much. I am genuinely blown away by the support for the podcast and the impact it has. It was a real highlight getting to meet so many listeners in person.

I also had many conversations with founders, CEO’s, Board advisors and investors. And it’s given me a pulse on the current state of the Fintech industry not just in Australia but globally.

Here are some of the insights I gained from those conversations and what it all could mean for Australian Fintech over the next 12 months or so.

Funding and Capital Raising:

Deals are happening, but mainly at the seed and series A stage. Pretty much every VC and investor I spoke with were clear, they want to see revenue and they want to see product market fit and a strong use case.

They are also scrutinising founders a lot more ensuring the capital is spent wisely on key/mission-critical hires and driving revenue growth. It seems insane to be even saying this but Lean Startup is very much back in fashion!

There’s still some unsavoury behaviour going on with term sheets pulled at the last minute. But it is giving opportunities to Fintechs who offer alternative sources of funding. Could this be an opportunity for companies like Fundabl or FundSquire (who had a heavy presence at Intersekt,) to really kick on in 2023?

Challenges ahead for Fintech lenders

For lending Fintechs, life is getting tougher especially if warehouse funding deals are up for renewal.There’s definitely pressure in the home lending space as sales drop and the e cost of funding has increased 5x in 2022.

Offering interest free credit is going to prove very costly. And I am seeing BNPL businesses start to reinvent their propositions. Last year every lending business was wearing the BNPL badge, but now many Fintech are trying to rid themselves of that badge.

I expect to see consolidation and transformation in these businesses. Again these are skills required in the aftermath of the GFC across Aussie banks and financial institutions.

UK Fintech vs Australian Fintech

So where is The good news? I was pleasantly surprised by the energy and optimism last week.

The week started off very positively by joining up with the UK Department of International Trade Fintech delegation.

10 Fintech companies made up the delegation as well as representatives from Fintech North.

It’s always good to get an outsider's view and the feedback I received was positive with most delegates feeling Australia is a place they could do business. Our guests from the UK seem genuinely excited by the Australian opportunity.

Listen to UK Fintech Companies to watch out for

Everyone at Intersekt who I spoke to acknowledges the challenges we face.

Sadly there were many people and companies not at Intersekt 2022. Volt Bank and Xinja are two high-profile examples that in Fintech fortune rarely favours the brave.

But there is an optimism and acceptance that we are moving into phase 3 of Fintech. If I cast my mind back 4 years ago and Sibos 2018, that was a landmark moment for Fintech down under. It’s a point where I personally felt I had made the right business decision by specialising in Fintech.

I have had some doubts over the past 12 months, especially with the noise around Web3. But Intersekt has rekindled my belief and passion for Fintech and here’s why:

Payments, Crypto and Blockchain Converge

Payments/defi, accounting/cost management, business lending, home loans and tech infrastructure are all growth opportunities.

The discussions in payments were all about tokenisation, CBDC’s and Defi. My fundamental belief is that these technologies would always play a role. My hesitation has always been centred around the technology usurping sovereign currencies.

That dream is a over and we are clearly seeing a world where the two coexist and enable rapid innovation.

Can Australian Fintech rescue the economy?

As we enter tough economic times small businesses in Australia face a significant threat. I'm a small business owner and the CX and UX from my bank is woeful. The problem is I have very few options and the process of changing banks is heavily paper focussed and manual.

Access to capital remains a major problem with the segment largely ignored by the major banks. Here's the problem, Australia has 2.4m small businesses, including 1.5m sole traders. This is the lifeblood of Australia's economy.

I am genuinely excited by the solutions being built by my friends at Cape, Thriday, Hnry, MyGigsters, Patron - and as I mentioned previously alternative funding sources.

MyGigsters is a great example of why I am so optimistic. My key takeaway from last week is this.

Australian Fintech is now a self-sufficient industry

Fintechs are building solutions that enable other Fintechs to launch and scale at low cost and fast. Running lean is now possible, building prototypes and getting products to customers can be done faster and cheaper than ever.

Back in 2018 a platform like MyGigsters would be very difficult to build and would take serious investment. By partnering with other Fintech's MyGigsters has been able to build something fast, at a low cost and get 3000 customers in 12 months.

It’s this infrastructure that enables rapid innovation. Lean startup really suits the Aussie market, we have a high proportion of entrepreneurs and almost 10% of the population own a business or are a sole trader.

Executive Hiring in Fintech

Hiring at an Executive level has started to ramp up again after a quiet couple of months.

There are some important trends to be aware of. All hires I’m working on now require Execs with experience in managing through a downturn.

Even in Chief Product Officer roles the emphasis is shifting from tech/UX to leaders who can manage a P&L and demonstrate growing top line while cutting costs.

If you started your career post-GFC this may seem a little strange to you, but for those who went through the GFC, it looks like your experience could be in demand over the next 18 months.

The Australian Fintech Job Market

The last 6 months have seen redundancies- more will follow!

So far the majority of redundancies have been poor performers, quiet quitters and those who refuse to return to the office. Sounds harsh but it’s a fact.

I’ve been vocal on this over the last six months to try and prepare my network for the change we are experiencing.

We all face a harsh reality now, the only indication that your operating model is working is profitability

Phase one of redundancies is to let go of the people who you won’t miss. Don’t let the crying CEO posts on LinkedIn fool you. There have been some serious performance and attitude issues for leadership to deal with over the last two years.

We are now hitting a phase of redundancies where great people are let go and top talent will hit the market. If you are a startup founder don’t get too excited just yet.

Salaries continue to be an issue. I see future pain for companies who have recently hired $150k candidates at $300k. As one CEO pointed out

‘at $160k they were great, but at $300k I’d expect 3 times the output I am getting from them today’

Elevating talent to their 1st exec position with only a few years of experience is like sending lambs to the slaughter in this current climate.

If you've had staff poached by offering double their salary, this may actually strengthen you and weaken your competitors. I expect to see serious levels of burnout as a result.

Where is the top Fintech Talent moving?

And this is why I think Profitable businesses will become the most sought after by talent. Sadly the industry will lose talent to Banks and tech companies like Canva will continue to poach our best people.

If I remember back to the GFC ‘unfashionable’ profitable companies were able to attract top talent from investment banks and management consultancies, as they sought a safe haven.

Commonwealth Bank is a great example, where they have transformed into one of the best-run digital banks in the world. Pre-GFC it was very difficult to convince tier-one talent that CBA was the right place for them.

Established, profitable companies in payments and financial services looking to innovate will offer compelling opportunities to top talent burnt out by startup life.

I am already seeing oustanding people avoid startups for more stable companies as we navigate this uncertain period.

Fintechs who run lean, generate revenue. move fast to profitability and have achieved product/market fit will attract the best investors and the best talent.

Founder of Tier One People and host of the Fintech Chatter Podcast.

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