Australian fintech has been spotlighted globally by the recently announced acquisition of Afterpay by Square. In a deal that, if approved by regulators and proceeds as expected, will rank as one of the largest Fintech deals ever recorded globally and the biggest takeover deal in Australian corporate history.

As highlighted in KPMG’s Pulse of Fintech H1’21 report, Australian fintech expects 2021 to be a record year in terms of investment. However, it is the nature of investors where we have seen the most significant change. Traditionally, early stage investors such as Venture Capital, family offices and HNWIs were primary supporters of fintech investments.

In recent times, we are seeing a maturing of the ecosystem, with landmark levels of M&A activity involving larger Australian financial institutions and strategic or trade investors, including the major banks. The sector in Australia has been further buoyed by a supportive public market, with a broad range of fintech companies already listed on the ASX and several additional IPOs expected to be successfully complete over the remainder of the year.




Funding

The ubiquity of funding across equity, debt and hybrid instruments will level the playing field, a trend that is even more pronounced in the current low-rate environment. This funding will arm fintechs with record levels of capital resources to be deployed across investment in key operational areas including technology, people, marketing and sales.

Talent

Well publicised successes in the fintech market will mean the hunt for talent becomes increasingly competitive. The ability for incumbent players to attract and retain the best talent will be a vital determinant in their ability to continue their digital transformation journeys and compete on innovation.

M&A

High levels of transaction activity will likely continue as corporates look to expand their capabilities and offerings while fintechs look to scale. Furthermore, we expect to see increased levels of cross-border M&A as local fintechs look to expand geographies and become global or regional leaders.

Partnerships

We’re expecting partnerships to remain a valid and critical means for incumbents to access fintech propositions. This will range from client facing product providers, to back office and support services, regtech and data analytic and open banking solutions.




Fintech predictions

Fintechs that quickly and successfully scale will be genuine challengers to incumbent providers, and this growth is already proven both globally and locally in Australia. This will become a catalyst for further innovation and investment within the sector across a broad range of categories. Major banks in Australia will continue to either acquire or partner with these players to access, or at least gain exposure, to their products, solutions, talent or customer base.

Looking ahead, we predict that the major banks will continue to invest (either directly or via commercial partnerships) in the full spectrum of the fintech ecosystem, however the key sub-sectors of focus will likely continue to remain within lending and payments, with an increasing focus on data/AI, regtech and middle/back-office solutions.  
  • CBA: Klarna, :Different, Payable, Doshii, Lendi, H20.ai
  • Westpac: Z1P, 10x, SocietyOne, Uno Home Loans, FrankieOne, InDebted
  • NAB: 86 400, Spriggy, Athena
  • ANZ: Airwallex, Cashrewards, Valiant Finance

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