The KPMG Fintech Landscape 2022 captures the breadth and depth of fintechs active and headquartered in Australia and provides a snapshot of the trends and developments taking place across the financial technology sector. It currently shows a total of 775 currently active fintechs, up from 718 when the landscape was last released in 2021, an 8 percent increase year-on-year.
This growth in the size and breadth of the landscape reflects the record levels of investment flowing into the fintech ecosystem, with the first half of 2022 recording over US$29 billion of investment into the sector.
The total investment has however been concentrated on the bigger end of town, including the acquisition of Afterpay by Block (formerly Square), and more recently we have seen deal volumes falling and some headwinds develop in the sector, with macro conditions, including inflationary pressures, rising interest rates and increased geopolitical tensions, leading 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.
This new focus on profitability is likely to drive a period of more managed growth, as fintechs balance their customer acquisition ambitions against their operating leverage and burn rate, and we’ve already seen some of the fintechs in the market look to downsize teams and look for efficiencies in their business.
In addition, we expect to see a level of consolidation take place as existing players in the eco-system look to create scale and cost efficiencies, thereby achieving an enhanced market position and stronger bottom-line performance.
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2022 key insights
Key insights from the KPMG Fintech Landscape 2022 include:
Payments
Payments remains the sector that features the highest number of companies in the Australian fintech landscape, with 19 percent of fintech firms in Australia sitting in this sub-sector.
Payments remains a highly innovative and rapidly changing sub-sector, and we expect to see a continued level of investment in the space. In addition, we foresee a level of consolidation in the payments landscape, with providers looking to create greater operating leverage and scale through M&A or strategic partnerships.
Lending
In line with last year’s results, the Lending space remains the second largest fintech sector in the landscape with consumers and businesses (including SMEs) increasingly turning to non-bank lenders and fintech players for their funding needs.
Fintechs have historically grown rapidly into this underserved pocket of the market however rising interest rates and have also created pressures on funding (both in terms of availability and cost) which in turn could have impacts on sustainability of business models, as well as credit quality as lenders chase higher margin customers.
Blockchain and cryptocurrency
Despite volatility in the underlying asset pricing, the Blockchain and Cryptocurrency sector has been the fastest growing sub-sector in the ecosystem. This sector has recorded an increase in participants of 19 percent against the 2021 landscape and now represents approximately 11 percent of active fintech firms in Australia.
We expect we will continue to see new emerging players, innovations and growth also in the coming years, especially as incoming regulation provides heightened levels of validity, compliance and governance over the asset class/technology.
Our one-page snapshot showcases the breadth of fintech companies operating in Australia.
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