Fintech startups: prepare to work harder and smarter in 2023


Startups are beginning to mature, and all eyes will be on the bottom line.
Australia’s fintech sector has matured significantly over the past 12 months.

We’re approaching a turning point in the fintech industry: startups are beginning to mature, and all eyes will be on the bottom line. Those walking the path to profitability in 2023 can expect to be faced with new obstacles as the symptoms of 2022’s economic pressures continue to manifest.  

A quick look at these challenges gives us an idea of the trends that may shape the fintech industry in 2023, especially with the backdrop of a tumultuous economy and a coming of age for many in the ecosystem.  

Australia’s fintech sector has matured significantly over the past 12 months, with 78% of fintechs now considered ‘post-revenue’ and capable of generating consistent sales, according to EY’s latest FinTech Australia Census.

That said, in that same report, the percentage of fintechs actually turning a profit remains steady at 30%. Their path to profitability looks difficult considering the perfect storm of rising interest rates, shrinking budgets, the growing cost of acquisition and scarcity of VC funds looming ahead. 

It’s clear that all businesses will need to work harder and smarter to drive revenue to stay dry in 2023. 

So what trends can we reasonably expect to play out for the fintech sector this year?

Trend 1. More is more: One-stop-shops are in

Most fintechs begin life by doing one thing really well – to cater for an underserved market that big banks were failing – Block (formerly Square) is a perfect example. Now that these niche fintechs are reaching scale, they’ll be forced to tackle many of the same challenges faced by their legacy rivals to diversify their revenue sources and future-proof their companies. 

SMB customers can be very expensive to acquire, which is hard to square given how little they actually spend as customers. SMBs go through the same consideration and assessment process as larger businesses, which makes for a high-touch sales process yet, once you seal the deal, they spend relatively small amounts. In other words, they buy like enterprises, yet they spend like consumers. On top of this, as fintechs penetrate further into their market, each customer is more expensive to acquire (and keep) than the last. To be profitable, vendors need to service this market at scale – and efficiently.  

Churn will also be a significant problem for fintechs regardless of whether their product is a ‘nice-to-have’ or a core operating tool, as many of their SMB customers close their doors. Those customers that do remain in business will cut costs, reducing payment interchange revenues as they spend less. 

This means SMB fintech providers must diversify and increase revenues by increasing the value they can offer each customer. 

The natural way to do this is by expanding their feature sets. At market scale, this is resulting in a convergence towards the idea of building a central business operating system and becoming a financial ‘one stop shop’ for small businesses. Fintechs that remain a one-trick pony will struggle to offer the level of services SMBs are coming to expect and will be less well-equipped to ward off growing competition from peers expanding into their area of expertise. We’re seeing this convergence across the financial sector as well as in specific industries. Vertical SaaS is dominated by strategies to become the central business operating system for one niche sector. 

Trend 2: Allies will become rivals (and vice versa)

Expanding product pipelines to meet customer demand and incorporate fresh revenue streams, brings with it new data-centric competitive dynamics and the rise of ‘frenemies’ in fintech. 

To build the vast majority of these new products and services, incorporating, syncing or extracting data from other systems is critical.

Intuit and PayPal offer an interesting example of this simultaneous competitive and collaborative dynamic.

Initially offering different products, Intuit’s QuickBooks and PayPal have worked together to acquire customers in partnership, and now they both offer working capital products to the same customers.

Financial statements from customers’ QuickBooks accounts would help PayPal to more accurately underwrite its merchant capital product. Yet, at the same time, Intuit also wants to underwrite and lend to those small businesses, and the comprehensive data available in customers’ QuickBooks accounts could be a competitive advantage to their credit modelling.

It could feel counterintuitive to let a competitor tap into a valuable differentiator. And yet any alternative ultimately restricts who customers can share their own data with and could risk reciprocal action, damaging your own value proposition.

This uneasy tension between frenemies is something more fintechs will need to come to terms with in the coming year. While it’s possible to make it work, as Intuit and PayPal do, in other cases, tensions are likely to come to a head, resulting in anti-competitive behaviour and acting as a catalyst for increased regulation. If regulation is slow to come about, tech providers could be forced to find ways around the issue – perhaps using less secure mechanisms to forcibly extract data – opening a new, problematic can of worms. 


Heading into 2023, there are two key takeaways for the fintech sector to ride out the turbulence ahead.

  1. Plan to do more with less to keep cash reserves healthy and retain customers
  2. Keep friends close and frenemies even closer

    Matthew Tyrrell is APAC Commercial Director at Codat.