The number of fintechs in Australia increased by eight per cent to 775 companies in the past year, according to KPMG.
The latest KPMG Australian Fintech Landscape Report 2022 shows that the number of Australian fintech companies grew from 718 in 2021.
KPMG found that 19 per cent of Australian fintechs operated in the payments space while a further 15 per cent were lending solutions.
It also found that “despite volatility”, the blockchain and cryptocurrency sector “has been the fastest growing sub-sector in the ecosystem, up 18 per cent from 2021” and makes up about “11 per cent of active fintech firms in Australia”.
The report stated that the “size and breadth of the landscape” revealed “record levels” of capital being invested in the area “with the first half of 2022 recording over $29.6 billion in investment.”
“However, this total investment has been concentrated in the greater part of the city, including the US$27.9 billion acquisition of Afterpay by Block (formerly Square), which was the largest global fintech deal in H1 2022,” the report said.
“More recently, changing macroeconomic conditions and evolving investor demands have been identified as potential obstacles to Australia’s fintech ecosystem.”
Apart from the Afterpay acquisition, the top deals in the Asia-Pacific region include the US$2.1 billion sale of Japanese fintech Yayoi by KKR, which was once in talks to sell MYOB to ANZ.
Australian trading platform Superhero announced a US$1.6 billion merger with cryptocurrency exchange Swyftx back in June to build cryptocurrency, equity and pension management capabilities.
Australian gaming fintech Coda Payments managed to raise $690 million, which will be used to develop international payments.
Meanwhile, Indonesian unicorn fintech, Xendit reached $300 million in a Series D funding round earlier this year.
However, KPMG Australia partner and head of fintech Dan Teper said recent “inflationary pressures, rising interest rates and increased geopolitical tensions” had led to “a greater degree of uncertainty around both the global and Australian economic outlook.”
“On the flip side of this, the balance between revenue growth and profitability continues to shift, with investors demanding a greater degree of visibility, and often a shorter timeframe, with respect to fintechs delivering a profitable and self-funded business model,” Teper said.
Teper said the “new focus” will drive “managed growth” among fintechs as the sector seeks to “balance their customer acquisition and top-line growth ambitions against their operating leverage and burn rate, with a number of fintechs already downsizing teams looking to find efficiencies in their business “
“In addition, a level of consolidation is expected as existing players in the ecosystem look to create scale and cost efficiencies, with the aim of achieving an improved market position and stronger bottom line performance,” he added.
