The Australian Fintech Landscape: main trends and opportunities for growth

The Australian Fintech landscape

The number of fintech companies in Australia has increased from around 400 in 2017 to more than 800 in 2021. In this context, there are some sectors that stand out where fintechs have succeeded in positioning themselves as world leaders, due to their capacity to innovate and offer technology-based value propositions that add value for their customers.

These sectors stand out within the Australian fintech landscape.

  1. The payments sector, particularly Buy Now Pay Later (BNPL);
  2. The small and medium enterprises lending sector (SME Lending);
  3. The digital banks sector;
  4. The blockchain and cryptocurrency sectors.

In 2020, investments in the fintech sector in Australia attracted close to AUD 2 billion (VC, PE and M&A). This means investments in the fintech sector increased by more than 250 percent compared to the previous year.

This data shows the Australian fintech sector has not only a large variety of players with cutting edge technological solutions, but also strong growth and the ability to attract global investment.

Payments

The payments sector has the highest number of firms in the Australian fintech landscape. The strong growth this sector has experiences is primarily due to the fact that:

  1. in Australiamost payments are settles via electronic means; and
  2. Australians are accustomed to using relatively advanced payments applications which are offered also by the major Australian banks.

This has resulted in the creation of fertile ecosystems for the proliferation of payment companies.

There are some data we can analyse to further understand this growth. For example, it’s possible to observe that in Australia cash is used in only 27 percent of transactions (as a comparison, in the Eurozone in 2019, 73 percent of payments were made using cash, with countries like Italy, Spain and Portugal still using cash to settle over 80 percent of transactions).

This percentage drops to only 5 percent if we take into account the population aged 19-39 years old.

For these reasons, Australia, in the coming years, has the potential to lead the world when it comes to payments technologies. Some examples of successful Australian companies in this sector are Tyro Payments, Zip and Afterpay.

Recently, Afterpay, was acquired by the US payments giant, Square, for more than $39 billion dollars. This transaction is not only the largest acquisition in Australian corporate history, but also one of the largest deals in the fintech sector.

SME lending sector

In Australia, the SME sector is represented by over 2 million companies that employ about 5 million Australians.

Approximately 1 in 4 SMEs find it difficult to obtain access to credit from Australian banks as SMEs, from a credit perspective, are often seen as riskier by major lenders.

This has led to a ‘funding gap’ in the SME sector worth over $90 billion. These $90 billion represent the amount of credit the SMEs would need to access to grow and develop, but which unfortunately they are unlikely to obtain.

This contributed to the creation of fertile ground for fintechs that focused on the SME Lending as the funding gap is a great investment opportunity in a market which is currently underserved.

For this reason, in recent years, we have witnessed a proliferation of fintech companies in the SME lending sector offering a technology-based value propositions, that allow small businesses to have easy and quick access to credit. (Some examples are: Judo Bank, Moula and Prospa).

This is one of the sectors in which we will keep seeing great growth in the coming years.

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2 thoughts on “The Australian Fintech Landscape: main trends and opportunities for growth

  1. Great insights Matteo, reflects the dynamic nature of this sector and I agree Payments and SME lending will be key battlegrounds for both incumbent banks and fintechs alike

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