Australia's fintech landscape has enjoyed strong growth over the past year with 775 currently active fintechs, an 8 percent increase from the 718 in 2021, according to the KPMG Fintech Landscape 2022.
The growth in the size and breadth of the landscape reflects the record levels of investment flowing into the fintech ecosystem, with the first half of 2022 recording over US$29.6 billion of investment.
This total investment has however been concentrated on the bigger end of town, including the US$27.9 billion acquisition of Afterpay by Block (formerly Square), which was the biggest global fintech deal in H1 2022. More recently, changing macroeconomic conditions and evolving investor demands have been identified as potential hurdles for Australia's fintech ecosystem.
Regionally, three of Asia Pacific's top five fintech deals were in Australia:
Asia Pacific Top 5 Fintech Deals H1 2022
| Company | Amount ($US) | Country | Sector | Deal type |
| Afterpay | $27.9B | Australia | Payments | M&A |
| Yayoi | $2.1B | Japan | Institutional/B2B | Corporate divestiture |
| Superhero | $1.06B | Australia | Wealth/investment management | M&A |
| Coda Payments | $690M | Australia | Payments/transactions | Recapitalisation/growth |
| Xendit | $300M | Indonesia | Payments/transactions | M&A |
Dan Teper, Partner and Head of Fintech, KPMG Australia commented: "More recently we have seen deal volumes falling and some headwinds develop in the sector, with macro conditions, including inflationary pressures, rising interest rates and increased geopolitical tensions leading to a greater degree of uncertainty around both the global and Australian economic outlook. On the back of this, the balance between revenue growth and profitability continues to shift, with investors requiring a greater degree of visibility, and often shorter timeframe, with respects to fintechs delivering a profitable and self-funded business model.
"This new focus on profitability is likely to drive a period of more managed growth, as fintechs balance their customer acquisition and top-line growth ambitions against their operating leverage and burn rate, with a number of fintechs already having downsized teams looking to find efficiencies in their business. In addition, a level of consolidation is expected as existing players in the eco-system look to create scale and cost efficiencies, with the aim of achieving an enhanced market position and stronger bottom-line performance," he added.
2022 key insights
Payments
Payments remains the biggest sub-sector in Australia's fintech industry, representing nearly a fifth (19 percent) of fintechs.
Payments is a highly innovative and rapidly changing sub-sector, and we expect to see a continued level of investment in the space. In addition, we foresee a level of consolidation in the payments landscape, with providers looking to create greater operating leverage and scale through M&A or strategic partnerships.
Lending
The Lending space remains the second largest (15 percent) fintech sector in the landscape. Consumers and businesses (including SMEs) are increasingly turning to non-bank lenders and fintech players for their funding needs.
Fintechs have historically grown rapidly into this underserved pocket of the market however rising interest rates and have also created pressures on funding, both in terms of availability and cost. This could have impacts on the sustainability of business models and credit quality, as lenders chase higher margin customers.
Blockchain and cryptocurrency
Despite volatility in the underlying asset pricing, the Blockchain and Cryptocurrency sector has been the fastest growing sub-sector in the ecosystem, up 18 percent from 2021. It now represents approximately 11 percent of active fintech firms in Australia.
It is expected that we will continue to see new emerging players, innovations and growth also in the coming years, especially as incoming regulation provides heightened levels of validity, compliance and governance over the asset class/technology.
Risk Warning: Cryptocurrency is a unregulated virtual notoriously volatile instrument with a high level of risk. Any news, opinions, research, data, or other information contained within this website is provided for news reporting purposes as general market commentary and does not constitute investment or trading advice.
