Australia saw a strong uptick from 2017, recording US$600 million across 28 deals, according to the KPMG Pulse of Fintech report.
After a drop in 2017 investment levels, 2018 is Australia’s second-highest year on record. Investment activity was broad, across a number of sub-sectors, such as payments, lending, regtech and open banking. The largest transaction for the year was the US$245 million acquisition of Avoka, a transaction management platform by Temanos.
Australia gained a significant amount of interest from investors in 2018 with respect to its open banking and open data regime. This is because the country is developing its open banking policies as an umbrella regime focused on customer data as a right.
In the VC space, Australia-based Data Republic raised US$22 million in Series B funding in Q4’18 led by Singapore-based Innov8 and Singapore Airlines. Futhermore, we have seen ANZ recently announce participating in a Series A funding round from UK open banking platform, Bud.
In tandem with the development of its open banking regime, Australia has also seen increasing interest from fintech investors in areas that enable open banking, including solutions focused on data sharing, consent management and digital identity verification.
Ian Pollari, KPMG Australia Head of Banking and Global Co-lead for Fintech, said:
“Investment in Australian fintech ramped up to record levels in 2018, both in terms of venture capital, but also in terms of Private Equity and M&A activity. We have rapidly built a thriving fintech eco-system and investment plays a critical role. Open Banking is another catalyst for further fintech investment, in particular investment in overseas fintech companies which we are already starting to see.”
Asian fintech funding reached a new high of US$22.7 billion in 2018 across 372 deals, representing a fifth of the total global funding of US$111.8 billion, More than half of the Asian investment, however, came from one global-record shattering megadeal in H1’18: an US$14 billion Series C round by Ant Financial. Outside of the Ant Financial deal, Asia only saw only one additional deal over US$1 billion: a USD$1.3 billion raise by online lending platform Lu.com in December.
China accounted for the lion’s share of Asia fintech investment, with $18.2 billion in funding during 2018 across 83 deals, led by Ant Financial’s US$14 billion raise in Q2. In part, this likely was a result of the maturation of key fintech subsectors in China.
For example, investors were less focused on the payments space as China has seen the rapid maturation of several dominant market leaders, leaving little interest for smaller players.
There was also an upswell of activity in other Asian jurisdictions in the region over the course of 2018. Among the top ten deals during the year, three were based in India (Paytm: US$356 million; PolicyBazaar: US$200 million; CentrumDirect: US$175 million), one in Australia (Avoka: US$245 million); and one in the Philippines (Voyager Innovations: US$215 million).
Investment and deal volume in Singapore grew for the fourth straight year, accounting for US$347 million across 61 deals. Australia saw US$572 million across 28 deals.
Looking forward, collaboration between fintechs and banks in Australia and Asia is expected to continue to grow, particularly in areas like KYC, AML and digital identity management – including facial recognition and voice recognition.
Blockchain investment is also expected to continue in Asia, with a growing focus on execution over experimentation.
While geopolitical volatility and trade concerns could put a damper on overall global fintech investment in 2019, the strong diversity of global fintech hubs, and the strengthening of subsectors, such as regtech and insurtech, should contribute to continued growth. AI and automation are expected to remain very hot areas of investor interest at the technology level.
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The Financial Services industry is transforming with the emergence of innovative new products, channels and business models. This wave of change is driven by evolving customer expectations, digitalisation, as well as continued regulatory and cost pressures. We are passionate about supporting clients to successfully navigate this transformation, mitigating the threats and capitalising on the opportunities. KPMG Global Fintech comprises professionals in over 50 fintech hubs around the world, working closely with financial institutions, digital banks and fintech companies, to help them understand the signals of change, identify the growth opportunities and to develop and execute on their strategic plans.