Investment in Australia’s fintech sector followed the subdued trend seen globally in the first half of 2019, as the market pauses ahead of future growth. The local sector reached US$101 million, a more than 50 percent drop on the corresponding period in 2018 (US$223 million).
However, more deals are on the horizon, with the recent record Judo Bank fundraising announced in July and the SME lender Prospa's successful IPO in June.
The biggest Australian fintech transaction recorded in the first half of the year was the Airwallex US$100 million Series C funding in March 2019, which was also the third biggest deal in Asia for the period.
Highlights from the H1’19 report
- Global fintech investment off to a slower start – from $62.8 billion in H1’18 to only $37.9 billion in H1’19. This decline might be short-lived given the large M&A deals on the horizon.
- VC investment remained robust in the Americas and Europe, receiving $7.5 billion and $3.3 billion in H1’19 respectively.
- Global fintech M&A activity took a breather, hitting $23.9 billion in H1’19 versus $35.6 billion in H1’18.
- PE firms are still active globally, with investments reaching over $1.9 billion across 35 deals in H1’19.
- Wealthtech investment hit $2.2 billion in H1’19, already surpassing 2018 total ($1.8 billion), despite fewer deals.
Key fintech trends in 2019
In addition to exploring global and regional trends, we discuss the following questions driving interest in the fintech market:
- What are wealthtech and proptech – and how are they evolving into key areas of investment?
- What is driving the strength of Europe’s fintech market?
- How is cross-border investment propelling the fintech industry forward?
- How are regulatory changes in China affecting fintech investment?
Reflecting deals seen in the broader investment market, global fintech investors showed a preference toward a smaller number of larger deals during H1’19, particularly in the more mature markets — such as US, Germany, and the UK, and fintech verticals — like payments and lending. In these sectors, investors have gained a better sense of the vertical winners and the emerging platforms that will be sustainable, and concentrated their investments accordingly. The next 12 to 24 months will be a critical period for many platforms that haven't been able to achieve scale; consolidation is likely to increase as they look for ways to survive and gain market share.
Open banking and open data a big driver of investment
Open banking and open data continued to be front and center for incumbent and challenger banks alike. Fintech companies are providing customer-focused value propositions and seizing opportunities to help incumbent banks leverage open banking (e.g. data sharing, customer management, consent, entitlement, digital identity management). For their part, incumbent banks are allying with fintechs to gain access to the technologies required to improve their customer experience.
Trends to watch for globally
The fintech market globally is expected to be hot heading into the remainder of 2019, particularly given the large M&A deals that could close in the US. Payments is expected to continue as the hottest area of investment, while regtech, cybersecurity, insurtech, wealthtech, and proptech are all well positioned for growth – in addition to B2B platform services. Consolidation in payments and other mature areas of fintech will likely speed up as winners continue to solidify their market share. Global expansion of fintechs and global investments are also expected to continue for the foreseeable future.