KPMG Australian Fintech Survey 2023 - Anthony Baum interview

What do you think will be the key challenge for your business in the next 12 months?

The key challenge for us over the next 12 months will be to support the ongoing success of our platform partners during the current period of economic uncertainty, driven by high interest rates and cost of living pressures. We will continue to invest in our technology to ensure our partners can provide the seamless lending experiences their customers demand. This means remaining hyper-focused on our pursuit of increased automation in our technology solutions to optimise customer experiences, drive efficiency, remove costs and accommodate scale. All while ensuring our partners meet their ongoing compliance obligations. We believe it’s this focus that will ensure Tiimely and our partners will emerge from the current headwinds with more robust businesses and market share growth.

What is your sentiment and view on the economy for the next 12 months?

We believe there will be ongoing uncertainty in the economy over the next six months before green shoots emerge in the second half of next year. Our view is that CPI will soften from the levels seen in 2023, which will support a reduction to the cash rate in the second half of 2024. We think this will translate to stronger business and consumer confidence levels, which will drive an increase in new home purchase activity. Against this backdrop, we believe there’s a risk that a number of fintechs will fail – in particular, those with weak balance sheets, and without diverse revenue streams. These challenges will be compounded by the lack of capital available in the current market, which a lot of growing businesses have had ready access to over the prior 2–3 years. In saying that, businesses who are able to ride out the next 6–12 months will emerge significantly stronger on the other side, and can capitalise on the upside we feel remains here in the Australian market.

What is your outlook for lending firms in the Australian fintech landscape?

It’s going to continue to be a challenging environment for non-bank lenders operating in Australia, as they wrestle with the increasing cost of, and diminished access to, wholesale funds. We have already seen this cause margins to shrink relative to the major banks, and over the longer term, will ultimately hamper their profitability and ability to remain competitive. Fortunately for Tiimely, when we launched in 2017 (then as Tic:Toc) we made the conscious decision to operate an asset light business model. This means we’ve been able to focus on being a platform technology company first and foremost, leveraging the balance sheet of our strategic funding partner (Bendigo & Adelaide Bank) to offer competitive lending solutions to our immediate customers or those of our partners. Our unique business model has multiple revenue streams and has evolved to a point where more than half of our revenues are now sourced from our Enterprise business, supporting numerous partners including two of Australia’s biggest banks, major brands like Qantas, and of course other fintechs and lenders.

Compared to last year, are you finding the current economic conditions more challenging for your business? How so?

We are starting to see an improvement in economic conditions for the Tiimely business. Last year we saw 12 consecutive rate rises, lifting the cash rate to levels last seen in 2012. This cost pressure, combined with the wave of customers rolling off low fixed rate home loans to higher variable rates, saw unprecedented levels of competition amongst lenders, with loss-lead pricing and incentives such as cashbacks to retain and win market share. In recent months, we have seen lenders pull back these incentives as they refocus on achieving a higher return on their capital. This change in market behaviour and the recent stability in the cash rate, has translated to increased activity across our platform. Although refinancing activity remains strong, we are now seeing the impact of increased cost of living pressures and high interest rates on the level of new property purchases, as borrowers come to terms with restricted borrowing capacity and ability to service loans.

If you were to increase your footprint in other markets overseas beyond New Zealand, which markets would you consider and why? Have your expansion plans changed over the last 12 months?

I was fortunate to complete a six-week research trip across the UK, Canada and the United States in mid-2023. The purpose of the trip was to identify and engage comparable companies with similar technology capabilities, and also seek out business opportunities for Tiimely in new regions. The trip gave me external confirmation that we are not only a market leader here in Australia, but an industry leader around the world in three key areas: ‘out of the box’ data access, enrichment, automation capability; the ability to configure credit/risk appetites at a granular level; and the ability for users to interact with data via our user interface layer. Based on what we currently know, the most likely market we would expand to would be the UK. This is because of the similarities we share in the financial sector, the high degree of government support for fintechs, and the potential for Tiimely to increase the levels of digitisation across the UK consumer lending market (which continues to accelerate). Although there is obvious potential for growth in new markets, we are very cognisant of the required investment and management focus needed to make global expansion successful. These views have only strengthened over the past 12 months, so we will be focusing on our customers and partners in Australia and New Zealand in the short term.

How satisfied are you with your ability to recruit and retain talent in Australia?

Tiimely has experienced steady growth since 2017 and there’s now ~140 ‘Tockers’ around Australia, most of whom are based here in our head office in Adelaide. We are a values-led organisation and the culture we’ve been able to build is something we are really proud of. It’s one of the main reasons we continue to attract and retain top Australian talent across all functions of our business. Our employee engagement scores – which we use to measure how positive employees feel about Tiimely – continue to exceed fintech industry averages. Over the next 12–18 months we’re hoping to lift that even further and set a new benchmark for fintechs here in Australia.

What was the rationale behind the decision of establishing your HQ in South Australia?

Simply put, it’s where myself and a small group of us founded the business. Better still, many of that small group remain employees of Tiimely today. While we remain proud of our South Australian roots, the breadth and location of our customers has grown and evolved with our business. We now have a modest office in Sydney that continues to grow.

Looking ahead, what do you think is the biggest opportunity for fintech firms in the lending space?

We believe the consumer data right (CDR) and rollout to the banking sector (Open Banking), is the biggest opportunity for fintechs in the lending space. CDR has the potential to drive more competition amongst lenders, which will ultimately enable greater choice for consumers. In the home loan sector for example, CDR will give consumers the ability to readily compare and switch loan products and services as their needs evolve. Despite Tiimely’s role in pioneering innovation in this area, it still remains challenging and time-consuming for customers. CDR also has the potential to drive innovation and be the catalyst for an influx of new products and services. Irrespective of what form they take, they will ultimately benefit Australian businesses and consumers. Nimble fintechs like Tiimely can be the instigators or the facilitators of this potential new wave of change.

How are you finding the current capital raising environment?

We are acutely aware of the challenges facing businesses currently seeking capital at a robust valuation. In particular, those who are not yet cashflow positive or without a reasonable line of sight to profitability. However, we do believe there is capital available for businesses with a unique value proposition and track record of executing against their strategy. Tiimely is in the privileged position of boasting a strong capital position, having raised $54 million in the past 18 months from existing shareholders. Our strong balance sheet, steady growth from inception, and increasing number of large platform partners licensing our technology, means we do not need to raise additional capital in the foreseeable future.

The report was conducted by Dan Teper, Partner - Head of Fintech for KPMG Australia and Matteo Musso, Associate Director – Consulting, Banking and Fintech Practice, KPMG Australia