There’s a tech for everything these days: MedTech, EdTech, FoodTech – you name it. Which may make fintech sound like just another portmanteau.
But what makes fintech different from the other “-techs” – besides the fact it deals in money – is just how varied it is.
According to a map put out by KPMG, there are more than 11 different types of fintech companies. These include: regtech, for regulation; insurtech, for insurance; wealthtech, for asset management – and many more.
This wide definition – as well as a lot of optimism and entrepreneurial energy – has meant there are now around 600 Aussie companies that fall within the fintech tent, most of which are only a few years old.
While having this number of fintech companies sound like a happy festival, the speed at which they’ve popped up has raised questions. Some have raised the obvious point: the definition is too broad. Others have been critical, saying the sector has gotten too big too quickly.
But for Ian Pollari, a KPMG partner and fintech expert, the wide definition and shooting up of companies is no problem.
“If we look at the fintech ecosystem in Australia it’s come on in leaps and bounds over the last three years in particular, with depth in lending and payments verticals and more recently growth in horizontal categories, such as regtech and data analytics,” he says.
“We’ve had government and regulators supporting the development of the sector and we’ve seen significant increases in capital invested in it.
“Last December the Australian Securities Exchange said it will move into production of deploying distributed ledger technology to replace the CHESS trading platform – which is another world-leading initiative. Coupled with the introduction of the New Payments, Platform, we are assembling critical infrastructure to support continued fintech innovation in Australia.
“However, in our enthusiasm for embracing fintech, we must not lose focus on the outcomes we are seeking to deliver and how ultimately, the sector will be assessed. In this context, successful players, either independently or in partnership with others, will need to deliver improved customer, cost, growth or regulatory outcomes.”
Mr Pollari is one of Australia’s foremost fintech observers and the head of banking at KPMG. He’s the lead architect of ‘The Pulse of Fintech’, KPMG’s quarterly fintech report and arguably the most incisive of its kind.
As part of its report, KPMG looks out for new ideas and monitors new entrants into the fintech industry. This puts KPMG – and Mr Pollari – in a good position to see what’s new and interesting.
Asked by AltFi what he sees as most promising in Australian fintech, Mr Pollari says property tech (“proptech”) and digital mortgages are ones to watch.
“Mortgages are the biggest sector of finance in Australia. For most banks it makes up the largest proportion of their revenue and earnings. We’ve seen some levels of innovation in the mortgage market but mostly in websites that search and select properties (like Domain and REA).
“But we’ve not seen many players deliver an end-to-end proposition. I think there’s some emerging fintech players that will be of interest. We’ll have to see if they can deliver a new customer experience, disrupt the economics of under-writing a mortgage or help banks identify and manage their risks more effectively than today.”
Another area of strong interest is regtech, which is coming to the front as global regulators enwrap companies in new regulations.
“We’re in the middle of a Royal Commission on the industry and there’s no shortage of other inquiries and policy changes that are putting pressure on regulated entities,” he says.
“Companies that can help identify and manage risks more effectively and efficiently through applying technology and data capabilities will be sure to grow.”
There are headwinds to watch out for, however. One, in particular, is consolidation. Like many others, Mr Pollari believes that some fintech niches have too many players, for example, alternative lending, which now has 75 different players.
“To me that is too many and we will naturally see consolidation of a kind that we’re starting to see in other markets. There is definitely a role for these platforms, but in the next three to five years we’ll see the dominant players in each category emerge.”
To hear more from Ian, join him at the AltFi Australasia Summit on the 16th April at Doltone House Jones Bay Wharf, where he will discuss these issues and much more.