Australia: home to a booming fintech industry

Australia’s booming fintech sector has quickly become a global hub of fintech activity. Recent statistics show that the industry has witnessed a fivefold increase in the number of fintech companies in just five years, now worth more than US$4 billion (AU$5.87 billion) and ranked sixth globally, as well as second in the Asia-Pacific region.

But what makes Australia a ripe environment for fintech innovation? Several factors play a role – Australia benefits from a rich ecosystem that is diverse and multinational; the region is home to a number of start-ups and scale-ups across several different fintech sub-sectors, and its readiness to take on new ventures has attracted record levels of investment.

Demand in the region has also been a key influence. Australia has been an early adopter of financial services innovation and technology, allowing fintech companies to quickly scale and embrace new digital models and payment solutions to meet growing consumer interest.

Regulation to support innovation

Australia’s payments regulation is undergoing an overhaul – allowing for greater transparent access to fast payments infrastructure.

This in turn will allow fintech startups to innovate, create new offerings and drive strategic partnerships with international companies for greater transparency in payments and frictionless experiences for consumers.

Sanjeev Kumar, product manager at Zai, an Australian-based global fintech company that provides embedded finance orchestration, believes a guiding principle for the sector’s growth is that regulation has enabled innovation.

“Regulators have been proactive and nimble in their decisions to bring in greater innovation and launch the right products at the right time,” he says.

“Australia has experienced tremendous growth in recent years. The financial industry is a completely different spectrum – from the developments in challenger banks and merchant payments, there are a number of successful platforms that are disrupting the sector, and fintechs are now getting the foundation to launch these platforms for a rapid adoption in the market. “

International hub for global talent

A recent EY survey found that the talent market in Australia is growing significantly year-on-year, despite setbacks and an increase in talent shortages amid the Covid-19 pandemic. In the last 12 months alone, 88% of Australian fintechs generating revenue overseas have created new jobs as a result.

“I would say one of the biggest assets Australia has is the talent pool,” Kumar says. “The growing fintech sector is continuously attracting multinational talent from around the world, with Australia conveniently located on the doorstep of Asia, a key market for innovation in fintech and payments, making the region a great place for talent looking to relocate.”

And it’s clear to see why – Australia has a significant pool of technical professionals and people with deep expertise in financial services. The region is also integrated with financial ecosystems around the world, with both Australian companies going overseas and international companies expanding into Australia.

Kumar adds that this plays into the hands of companies looking to expand their regional headquarters and explore partnerships with foreign firms.

“Another key driver for attracting talent is the ease of doing business in Australia. Licensing regulatory hurdles are less stringent if businesses have their policies and processes in place, and it is relatively easy to obtain the necessary licenses to operate within the payments sector.”

Zai’s expansion was aided by Australia’s Trade and Investment Commission (Austrade). By providing on-the-ground advice, Austrade was able to provide Zai with the connections it needed within its target market, while helping the fintech gain a better understanding of the local business landscape.

Capital investments are skyrocketing

Australia’s overall capital raising for startups and businesses has been recognized on a global scale, with 44% of companies raising over $10 million (AU14.68) million to date and 14% raising over $100 million.

Additionally, 88% of Australian fintechs three years or older and 81% of fintechs two years or older are now post-sales as well, showing a promising sign of the sector’s continued maturity and growth.

A further 40% of fintechs in Australia now generate revenue from overseas, and 18% derive more than half of their revenue from international clients. “It’s the perfect triumvirate with the government, regulators and businesses aligned,” Kumar says. “They have created the infrastructure and foundation for innovation.”

Disruption in the payment sector

Australia’s largest segment of the fintech sector was recorded to be in digital payments, with e-wallets and supply chain part of the most common type of fintech (43%), followed by lending (30%).

The sector’s total transaction value is estimated to be US$92 billion (US$135 billion) in 2022, with the number of users in this sector also expected to grow significantly to reach 21 million users by 2026.

Other sectors are also growing rapidly, including ‘buy now, pay later’, open banking, insurtech and decentralized finance.

“The buy now pay later sector came into Australia about five years ago. Now we have a myriad of Australian startups disrupting the sector, both locally as well as globally to ultimately disrupt a much larger ecosystem,” says Kumar.

There have also been several fintech partnerships – Pollinate teamed up with National Australia Bank to provide a technology platform for more agile banking services for small and medium-sized businesses (SMEs).

Proactive Jurisdiction

The Australian Government has taken a more proactive stance to encourage competition and innovation also in financial services,

The recent Consumer Data Right (CDR) Bill from the Australian Parliament has cultivated the open banking and payments sector, which is likely to further the digitization of the country’s banking sector.

The Australian Trade and Investment Commission (Austrade) accelerates the growth of exporters, attracts foreign investors and stimulates the visitor economy.
To find out how Australia’s fintech brilliance can help your business, visit austrade.gov.au/fintech