Fintech is becoming increasing relevant to Australia’s long-term economic outlook. Earlier this week, ANZ’s Shayne Elliot told the Sibos conference in Sydney that tech-driven disruption would radically change the shape of our banking industry.
Over the past five years, the H2 Ventures and KPMG Fintech100 report has tracked the emergence and maturation of the startups looking to revolutionise the financial services sector.
Last night, we released the 2018 report at the Sydney Startup Hub. It reinforces that fintech has become far more than a fad. Venture capital backing for the sector continues to accelerate. The companies on the 2018 list have raised over US$52B in venture capital, more than double the total of last year’s list, and more than US$27B of capital in the past 12 months, a 366 percent increase over last year.
As in past years the list is dominated by Chinese and US companies. China’s Ant Financial and JD Finance take the top two spots, with Singapore’s Grab taking third. However, global competition continues to expand, with 36 different countries represented in the full Fintech100, up from 29 in 2017 and 22 countries in 2016. Almost half of the companies on this year’s list (41) were founded and continue to operate in emerging markets.
But Australia also continues to fare well. Our fintech ecosystem has once again demonstrated its global relevance, with a strong showing. Indeed it was fitting that we launched our our fifth report in Australia, having held similar launch events in London, San Francisco, Singapore over previous years. It was also fitting that the event was hosted in the heart of Australia’s entrepreneurial community, at the Sydney Start-up Hub – and that James Ma of JD Finance was on hand as a representative of China’s fintech ecosystem.
In terms of Australian fintech, millennial ‘buy now pay later’ fintech AfterPay Touch shot up 18 places to 26 on the ‘Leading 50’, while international payments firm Airwallex was a new entry at 49. Their presence shows that local fintechs with global ambitions are able to attract customers to scale beyond our shores and raise capital from international investors.
Five more Australian companies made the 2018 “Emerging 50’ list: Agridigital, Look Who’s Charging, Nod, Power Ledger and Trade Ledger – demonstrating that we continue to develop exciting new fintech startups in this country.
Globally, payments and lending continue to be the dominant sectors represented in the Fintech100. Wealth management is seeing significant activity, with 14 companies on the list. Insurtech remains strong, with 12 companies. One new additional this year is the emergence of neo-banks, with 10 on the list. This represents the beginning of what is likely to be the accelerated growth of digital banking models.
With big tech deepening their activity in the sector (Amazon is providing payment services and loans to merchants on its platform, while Facebook recently secured an electronic money licence in Ireland) – it is more important than ever we cultivate our own fintechs. Otherwise we risk not just missing out on global growth opportunities, we also risk international players disrupting our own local finance sector.
The Fintech100 shows that the effort in Australia from industry, government and the startup community is beginning to bear fruit. But with increasing global competition, we cannot afford to become complacent. We must continue to encourage more founders to start more fintechs. Partnership is key to scaling successful fintechs, so large businesses must continue to explore new ways of collaborating with our local startups. And investors and the business community at large must continue to provide the funding and pathways to success that Australian fintechs need to flourish.