Fintech investment takes a breather as industry prepares for global expansion

Like the global fintech market, investment in the Australian fintech sector has taken a pause for the first half of 2019 as the industry prepares for the next phase of its development.

Our last Pulse of Fintech report shows that in 2018, global investment in fintech companies hit $111 billion USD across 875 deals (a record year) with the fintech landscape growing at a clip both domestically and internationally.

In Australia, $800 million AUD was invested in fintechs across 28 deals – and since just last September, 46 new fintech companies have arrived on the scene.

The current Pulse of Fintech report shows $37.9 billion of global investment in the first half of 2019 across 962 deals. This is primarily due to a lack of mega-deals, such as Worldpay’s $12.9 billion acquisition of Vantiv last year.

Despite the slowdown in investment, the scale and diversity of this rapidly evolving sector will present many opportunities.

One such example of fintechs, completely new on the scene, is the arrival of Australia’s first digital banks. Termed ‘neo-banks’, these new fintech companies provide banking services to customers without relying on traditional banking technology or sprawling networks of physical branches.

The intent of these neo-banks is to operate in a nimble way in the banking sector, providing increased consumer choice and driving increased innovation in the sector.

Combined with the advent of Open Banking that will come into effect with the Consumer Data Right Bill now having passed through Parliament, the banking sector is set to undergo transformational change. But it’s far from the only sector of financial services that looks to be disrupted by fintech this year.

The insurance industry has seen twenty more ‘insurtech’ firms arrive in the last year alone.

Whilst added competition to any market is generally beneficial from a consumer standpoint, existing insurance providers could find benefit in investing in or partnering with insurtech firms to realise new ways of doing business or accelerating their transformation efforts.

As well as changing the face of many financial services markets, fintech companies dedicated to changing the way middle and back office jobs operate are growing too.

Last year there were 28 firms offering middle and back office services in Australia.  This year, there are 64.

The exponential growth in the number of fintech firms is something to be excited about – but the maturation of parts of the ecosystem is just as interesting.

The increased levels of capital entering the eco-system combined with the maturation of start-ups in certain sectors will likely lead to a consolidation within certain categories over the coming year.

Our number one prediction in our latest report is that mature fintechs in the payment and lending categories will engage in M&A activity to scale up or engage in international markets. This will have the flow-on effects of increasing the size of future deals in the sector and could see the rapid expansion of service offerings across international borders.

In conclusion, there will continue to be a vibrant and exciting fintech  landscape in Australia, benefiting customer choice and assisting our financial services industry to maintain its reputation as a highly innovative international market.

 

KPMG Fintech Landscape 2019 2018 # Change % Change
Infrastructure and Platforms 27 n/a 27 n/a
WealthTech 77 79 -2 -3%
BlockChain 30 31 -1 -3%
Personal Finance Management 27 41 -14 -34%
Payments and Digital 141 128 13 10%
Middle and Back Office 64 28 36 129%
Neobank 5 n/a 5 n/a
Lending 77 78 -1 -1%
Data and Analytics 36 58 -22 -38%
Insurtech 35 15 20 133%
Regtech 44 45 -1 -2%
Capital Markets 43 57 -14 -25%
Crowdfunding 23 23 0 n/a
Total 629 583 46 8%
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