The number of fintechs in Australia increased by eight percent to 775 companies over the past year, acccording to KPMG.
The latest KPMG Australian Fintech Landscape Report 2022 shows the number of Australian fintech companies grew from 718 in 2021.
KPMG found 19 percent of Australian fintechs operated in the payment space while another 15 percent were lending solutions companies.
It also found that “despite volatility”, the blockchain and cryptocurrencies sector “has been the fastest growing sub-sector in the ecosystem, up 18 percent from 2021” and makes up roughly “11 percent 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 space “with the first half of 2022 recording over US$29.6 billion of investment.”
“This total investment has, however, been concentrated on the bigger end of town, including the US$27.9 billion acquisition of Afterpay by Block (formerly Square), which was the biggest global fintech deal in H1 2022,” the report stated.
“More recently, changing macroeconomic conditions and evolving investor demands have been identified as potential hurdles for Australia’s fintech ecosystem.”
Outside of the Afterpay acquisition, the top deals in the Asia-Pacific region include the sale of Japanese fintech Yayoi for US$2.1 billion 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 management capabilities for cryptocurrencies, shares, and superannuation.
Australian gaming fintech Coda Payments managed to raise US$690 million, which will be put towards developing international payments.
Meanwhile, Indonesian unicorn fintech, Xendit reached US$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” have led to “a greater degree of uncertainty around both the global and Australian economic outlook.”
“On the back of this, the balance between revenue growth and profitability continues to shift, with investors requiring a greater degree of visibility, and often shorter timeframe, with respects to fintechs delivering a profitable and self-funded business model,” Teper said.
Teper said the “new focus” will drive “managed growth” amongst fintechs as the sector seek to “balance their customer acquisition and top-line growth ambitions against their operating leverage and burn rate, with a number of fintechs already having downsized 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 enhanced market position and stronger bottom-line performance,” he added.
