While merger and acquisition activity has slowed, venture capital investment in Australia's fintech sector has charged ahead, up 153% year on year according to KPMG’s Pulse of Fintech report.
Investment in the sector reached $522.4m in the first half of 2020. Thus far this year, the largest fintech transactions regarded Airwallex and Judo Bank, with the former group raising $222m in venture capital investment and the latter receiving $203.4m from private equity investors.
“Australia is showing itself to be a strong fintech hub globally, with solid investments in H1’20 despite rising pandemic concerns,” said Dan Teper, KPMG Australia partner and head of fintech.
“As fintechs in Australia aggressively work to scale and maturity, they are expected to drive increasing investment in the space. Additional offshore acquisitions are also expected as fintechs target international growth.”
Over the first half of 2020, the Australian government was among the many around the world which actively pushed their fintech agendas forward.
In March, Australia re-opened submissions to its Select Committee on Financial Technology and Regulatory Technology to better understand how COVID-19 has impacted the sector and to identify how support can be “rapidly deployed”.
“Government is continuing to play a key role in supporting the growth of a vibrant fintech eco-system in Australia, and in particular during the COVID-19 pandemic,” said Teper.
“These positive investment numbers will no doubt be helpful to policymakers hoping to accelerate the emergence of the sector as a platform for global Australian companies. With other jurisdictions also looking to create fintech opportunities, we cannot afford to take our foot off the pedal.”
On a global scale, KPMG expects the COVID-19 pandemic to accelerate the fintech sector’s already-rapid growth.
“COVID-19 will be a key driver for fintech investment heading into H2’20 given the strong acceleration of digital trends – such as the use of contactless payments and the increasing demand for e-commerce and digital service models. This will also see strong investment in related enabling technologies – such as cybersecurity, fraud prevention and digital identity management,” explained Ian Pollari, KPMG global fintech co-leader.
However, that investment is not expected to be seen uniformly across the sector.
“Over the remainder of 2020, we will likely see investors continuing to focus on late stage deals and safe bets given the current uncertainty,” said Pollari.
“This could potentially create challenges for less mature fintechs which may find themselves running out of cash and struggling to raise additional funding.”
