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Australia’s limited talent pool compounds fintechs’ commercialisation challenges
AI may make it easier to build a fintech product, but it has not made that product easier to commercialise.
Fintechs still need experienced software engineers with deep technical knowledge and domain expertise to unlock the full productivity benefits of AI tools.
They also need skilled salespeople to navigate the long procurement cycles and complex stakeholder environments that characterise financial services.
Both capabilities remain difficult to find.
Sales roles are particularly challenging because they require a strong technical understanding of the product as well as the ability to communicate its value and build institutional relationships.
These long sales cycles make it harder for smaller, innovative companies to break in and compete with larger incumbents.
As one participant explains:
"You can't get into a bank in three to six months. It's going to take you two to three years' worth of relationships before you can even get that product in the door."
These barriers may help explain why 30% of fintechs list customer acquisition costs among their top challenges for the next 12 months.
Despite these constraints, most of the sector is actively hiring.
With the exception of wealth and investment fintechs, most respondents plan on a moderate or significant increase in headcount.
Yet skilled migration pathways are currently underused, as 63% default to hiring local talent. With most Australian fintechs concentrated in Sydney and Melbourne, continued reliance on the local workforce intensifies competition for already scarce skills.
What fintechs identify as their biggest barrier depends largely on where they sit in their journey to profitability.
However, viewed in aggregate, regulatory change emerges as the top challenge fintechs face in 2026.
Industry leaders highlight that their objection is not to being regulated, but the lack of consideration for how those regulations will impact the fintech sector.
As one leader observes, “The challenge is not that regulators want fintechs to fail; the challenge is that regulators often don’t have a view on fintech at all.”
Policy settings are typically designed for banks and other large institutions, leaving fintech to absorb what may be unintended consequences.
Leaders also describe a gap between how regulators explain new requirements and how legal advisers interpret them. This uncertainty leads to a kind of paralysis, with entrepreneurs hesitant to innovate for fear a regulator later rules them offside.
One founder says entrepreneurs are spending more time interpreting compliance obligations than developing new products, pushing the industry into what they describe as "a slightly less ambitious space overall."
Regulatory pressure differs across fintech subsectors
Regulatory reform does not affect every part of the fintech sector in the same way.
Payments businesses are significantly more likely to be impacted by both the anti-money laundering and counter terrorism framework (AML/CTF) and the PSP framework as their biggest regulatory burdens.
Meanwhile, fintechs in lending & credit are more concerned with ACL requirements, and data & information management fintechs are more likely to cite CDR/Open Banking requirements.
Consultation, implementation periods and compliance requirements therefore need to account for differences in business model, customer risk and operational scale.
Compliance with regulation is also not the only concern.
For example, PSP licensing reform stands well ahead of any other issue facing payments businesses.
This is a strong indication that the next phase of payments growth will be shaped by the regulatory transition.
The burden of regulatory compliance is only part of the picture. Many are also concerned with the pace at which frameworks adapt to industry changes.
More than half believe Open Banking/CDR reform is moving too slowly, while almost half say the same of payments and licensing reform. Very few believe either area is moving too quickly.
Cyber security and the insurance squeeze
However, leaders warn that the cost of demonstrating this capability is increasing.
One member likens rising cyber insurance premiums to the impact of climate change on residential insurance. “There is an increasingly large portion of Australian residential property that is uninsurable because of floodplains, bushfires and other risks.”
Assurance requirements such as Service Organisation Control 2 (SOC 2) reports, International Organisation for Standardisation (ISO) certification and CDR-related assessments have become competitive advantages and may increasingly become prerequisites for insurance, procurement and institutional partnerships.
While strong assurance requirements support trust and system resilience, high upfront costs may prevent new providers from entering the market.
Lack of clarity on software R&D eligibility
Many leaders are thus frustrated by perceived ambiguity about whether software development activities qualify for the RDTI.
This confusion may stem from the wording of official published guidance on eligible R&D activities, which describes “routine software development activities” as “generally not eligible as core R&D activities.” It goes on to say that “Such activities rarely involve a technical hurdle that can only be resolved by undertaking hypothesis-driven experiments.” However, it is important to interpret this guidance within the given context. It is not saying that it is rare for software innovation to be eligible for the RDTI. It is explaining why routine software development and coding are not typically core R&D activities.
Still, several leaders report audit experiences that left them questioning whether any claims can be defended with confidence. They argue that the issue is not necessarily the existence of compliance reviews, but the lack of clear and practical guidance about what constitutes eligible software R&D.
As a result, fintechs who may be eligible for the RDTI choose not to claim because the administration, documentation and potential exposure outweigh the expected benefit.
As one participant put it, "the pain outweighs the gain."
Clawback mechanisms add to the uncertainty
Retrospective reviews and clawback mechanisms create additional uncertainty, particularly for early-stage businesses.
Roundtable participants acknowledge the need to prevent misuse but argue that compliance activity should distinguish deliberate abuse from good-faith errors and help genuine claimants understand their obligations.
Several felt audits were designed to identify mistakes rather than improve compliance.
They describe businesses being “caught out,” repayment demands arising from good-faith errors, and an approach they compare unfavourably with the ATO’s compliance practices.
Tax settings and fallout from the 2026 Australian Federal Budget
Fintech leaders voice significant concerns over Australia’s tax settings, particularly changes from the 2026 Federal Budget that they believe make Australia less desirable for founders.
Many fintech leaders are critical of changes to the capital gains tax (CGT). They believe tax settings influence where talent, capital and future economic activity ultimately reside and claim tax policy determines where they build companies and establish tax residency.
However, it should be noted that our survey results suggest tax settings are the least impactful factor when it comes to international expansion plans.
Notably, survey respondents rank the 50% CGT discount as the government support most worth keeping. This survey was conducted before the most recent carve-outs, but the key concerns remain relevant.
Key CGT changes since this survey was conducted
In September 2026, Treasury released draft legislation for a startup CGT concession that softens several of the most contested elements of the original proposal: the minimum share-holding period was cut from five years to three, a proposed $10m lifetime cap on gains was dropped, and the eligibility window was extended from ten to fifteen years.
Fintech-specific concerns about being excluded from the concession altogether were also partly addressed, with a carve-back for businesses developing technology for use in finance, insurance or investment.
FinTech Australia has called the draft an improvement, but insufficient.
“The IBCC’s eligibility criteria are far too complex to meaningfully influence market behaviour. Founders, investors and employees cannot confidently rely on its availability when making founding/investing/ESOP decisions, because they won’t know whether their firm will be eligible for the concession when they later dispose of their interest.”
CEO Rehan D'Almeida cautions that
"a tax incentive wrapped in uncertainty is not much of an incentive."
How can Australia’s government better support its fintech industry?
Fintech leaders offer their suggestions for how Australia can strengthen our sovereign fintech capability.
Improve Government procurement of local fintech solutions
Participants argue that Australian fintechs can win significant public-sector work overseas while struggling to secure comparable opportunities at home.
In their view, governments frequently talk about supporting innovation in Australia but rarely put their money where their mouth is when it comes to procurement.
They describe local procurement processes as lengthy, resource-intensive and better suited to large consultancies and established providers. One leader describes current processes as “death by procurement” and said startups could face thousands of questions without adequate consideration of the broader value their technology provides.
This type of government support does much more than add a revenue stream. It helps fintechs build domestic experience, demonstrate their capabilities and become part of Australia’s financial and public-sector infrastructure.
Fintechs simply want a fair opportunity.
To achieve this, they offer the following suggestions:
Create shorter and more proportionate procurement pathways for startups and scale-ups.
Provide more opportunities for local fintechs to test solutions through pilots and controlled implementations.
Assess innovation, interoperability and broader ecosystem value alongside functional requirements.
Avoid tender requirements that disproportionately favour large incumbents or consultancy-led delivery models.
Consider the domestic capability and institutional knowledge created through their purchasing decisions.
Provide pathways into institutional markets
Australia produces strong ideas and intellectual property, but fintech leaders believe more can be done to help promising innovations find practical applications.
Without access to real customers and operating environments, technically promising products may struggle to establish the assurance, integration history and institutional credibility required for wider adoption.
Early-stage fintechs do not always need another funding program.
They may benefit more from direct engagement with financial institutions, industry experts and potential users who can help them identify genuine market needs, understand operating constraints and refine how their technology creates value.
Closer industry partnerships, such as the Buy Australian AI initiative, can help institutions understand emerging fintech capabilities and give founders earlier insight into the technical, regulatory and commercial requirements they will need to meet. This would help fintechs develop products around real problems rather than trying to find a market after the technology has already been built.
Chapter takeaway:
Australia needs resilient, competitive and sovereign fintech capability
A resilient financial system calls for a diverse base of domestic fintech providers capable of meeting appropriate security and governance standards, competing for institutional work and retaining strategically important technology and expertise locally.
Clearer regulation, proportionate assurance requirements and fairer procurement pathways would support individual fintechs while strengthening Australia’s control over the capability and infrastructure on which digital financial services increasingly depend.