The very best start-ups in this fast-growing sector have a few factors in common – and techno-wizardry isn’t top of the list.


The global fintech industry has ballooned at an unprecedented rate in the past five years. In 2015, investment in fintech was estimated at $US20 billion ($27 billion), a seven-fold increase in just three years. But with an overwhelming number of firms offering options in payment, lending, personal finance, crowdfunding and more, how can you spot the stars that will achieve long-term success in a rapidly changing environment?

Secretary of FinTech Australia David Ball says that while there is no crystal ball, there are certain indicators investors should look for when backing a fintech start-up.

Stir up the skills mix

Almost without exception, Ball says, the skills the founders and any staff bring to the business are the most important ingredient.

“From my perspective, the start-up team is really important,” he says. “The team really needs to have financial services experience – that’s a given. But they must combine this with experience and skills from other areas as well.

“What I see in the industry is a lot of career bankers believing they can start a fintech the same way they launched a product in a bank, and for the most part they haven’t succeeded. There is something about combining financial services experience with non-banking skills like AI [artificial intelligence] or blockchain – that’s where the exciting stuff happens.”

Ball says one of the reasons financial services experience is so critically important in a start-up is the heavy burden of regulation. 

“The thing that is unique about fintech as a start-up area is that it’s very highly regulated – and rightly so. So having an understanding and a close relationship with the regulators, and making sure you maintain your compliance from day one is critically important. You can’t ‘build and break stuff’ in fintech like you can in other industries.”
There are a lot of opportunities in fintech and I don’t think you necessarily need to have a new and groundbreaking idea to succeed

Take the new with the old

A common misconception around fintech is that the latest ideas are always the game changers. Ball says there is plenty of room for redefining the wheel as well as reinventing it.

“There are a lot of opportunities in fintech and I don’t think you necessarily need to have a new and groundbreaking idea to succeed,” he says. “Banks are pretty poor at customer experience so if you can improve that, you can attract users.

“In saying that, there are also a lot of opportunities to fundamentally change how things work in banking like what Ripple and other blockchain start-ups are doing in the payments space. That is really exciting and is a big idea that could fundamentally change banking.”

Spot a top-notch business model

As a smaller market, the Australian fintech industry demands start-ups begin their enterprise with a clear purpose and strategy. Without this, a new fintech is at a major disadvantage.

“Start-ups in this country do need a business model,” Ball says. “We don’t have a capital market like in the United States where you can get funding to essentially just play around. As interesting as it is to explore start-ups in this space, you do need the financial services experience and a business model to get funding.”

Ball says the business model should focus on leveraging something the banks already do, but don’t do well.
“The business model generally has to be a traditional banking product or service,” he says. “But one that uses technology to innovate the delivery or customer experience of that product.”

Look for untapped potential

Earlier in 2016, the federal government outlined 12 priority areas for investment in the local fintech industry, with the aim of boosting exports in financial services. The priority areas include blockchain, crowdfunding, comprehensive credit reporting, cyber security and insurance. There is huge untapped potential in some of these areas, Ball says, and only limited opportunities in others. 

“Fintech is really a catch-all for many different money-related start-up verticals,” he says. “Insurance is probably at the earliest stage of fintech verticals, and there is so much room for innovation of delivery and customer experience there. In other areas, like lending, there are already a lot of good people doing good things so there is less opportunity.”
This article represents the views and opinions of the author and do not necessarily reflect the opinions of BPAY.
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