The KPMG Fintech Landscape 2023 captures the breadth of active fintech firms headquartered in Australia as well as providing a point-in-time snapshot of the trends and developments taking place across the financial technology sector. As of this calendar year, our research shows a total of 830 currently active Australian-headquartered independent fintech companies, a three percent decrease on last year’s figures.
This slight decrease in the number of firms active in the Australian fintech landscape, comes as no surprise given the economic headwinds and the material shift in investor sentiment that have characterised the past 12 months. This consolidation in the sector had been expected for some time as a result of larger players looking to rationalise their activities and create scale through strategic mergers and / or acquisitions, and smaller players struggling to find meaningful scale while balancing capital pressures in what has become a more challenging economic environment.
The intense level of investment and M&A activity that characterised the period to early-2022, has been followed by a more subdued market. This, coupled with an overall greater degree of uncertainty around the Australian economy, inflationary pressures and higher interest rates, have significantly increased the cost of capital to levels not seen in roughly a decade. It has led investors to revise their asset allocation decisions as well as risk profiles, prioritising safer and more prudent investments over growth opportunities within the fintech space.
When it comes to fintech firms, growth and an ability to access capital are joined at the hip. This means that in this more challenging capital raising environment, fintech founders have had to make the difficult decision to contain costs in order to extend their runway, and to prioritise self-sustained profitability, as opposed to growth and valuation ambitions.
Looking ahead, we expect to see modest growth (if any) across the landscape, with deals concentrated in pockets of the market such as AI or on scalable, and profitable, business ventures, rather than on riskier pre-revenue or unproven business models.
Key fintech insights for 2023
- Payments remain the largest sector in the Australian fintech landscape, with over 160 firms, representing roughly 20 percent of the landscape.
- Lending also retains its place as the second largest sector in the Australian fintech landscape, with around 140 firms, representing 17 percent of the fintech landscape.
- Wealthtech is the third largest sector in the Australian fintech landscape, representing 10 percent of total firms.
- NSW remains the state featuring the highest number of fintech companies (59 percent) followed by Victoria (24 percent) and Queensland (12 percent).
Fintech sectors in focus
Areas of focus for the financial technology industry in Australia include:
Payments
The Payments sector remains the largest of the Australian fintech landscape, featuring the highest number of participants, with 20 percent of fintech firms in Australia sitting in this sub-sector. This sector also features some of the most mature and established fintech firms in the country.
In recent years, this sector has experienced above-average growth and record levels of investments, putting Australia on the global map when it comes to fintech. Going forward, we expect to see continued consolidation among players in the payments space, in order to create economies of scales and strengthen their market position.
Lending
In line with last year’s results, the Lending space remains the second largest fintech sector, representing 17 percent of total fintech firms in the landscape. The consumer and SME sectors have historically been left relatively underserved by incumbent banks and lenders, which has resulted in customers increasingly turning to specialist non-bank lenders and fintech players for their funding needs.
However, with funding costs for non-bank lenders materially changing over the past 18 months, the customer acquisition and product strategies of these business will likely need to adapt to these new market conditions if they are to continue to grow and remain successful.
Blockchain and cryptocurrencies
The rapid growth in the Blockchain and crypto sector that characterised the period of 2020 to 2022, appears to have cooled, with the focus now shifted towards mature and profitable fintech companies operating in the space.
This translated in a 6 percent decrease in the number of firms active in this sub-sector, with players either exiting their crypto business or considerably resizing their operations due to a combination of structural challenges, regulatory uncertainty, market headwinds and a decrease in the value of their underlying asset class. In addition, a number of global high-profile failures in the sector has had a contagion effect on the broader market participants in the space.
Our one-page snapshot showcases the breadth of fintech companies operating in Australia.
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