For the second year in a row, the Australian fintech landscape has seen a decline in the number of independent active fintech firms headquartered in Australia, with a 7% fall between the 2023 and 2024 KPMG Fintech Landscape.
As foreshadowed in our previous publications, this comes as a result of the following:
- M&A activity that has continued to take place within the sector;
- Consolidation and mergers in the sector as fintech start-ups and scale ups continue to search for scale and self-funded sustainability in a tighter funding market;
- A number of fintechs running out of capital resulting in a forced sale or closure; and
- A continued slow down in the number of new fintechs being launched, part of which is due to the more challenging local macro-economic and funding conditions.
Australia Fintech Landscape 2024
One page snapshot of the Fintech landscape in Australia.
Market update
Moreover, M&A activity has tended to be concentrated on a smaller number of larger deals predominantly with foreign strategic investors, with financial sponsor (e.g. PE and VC) activity being less prevalent.
This market consolidation trend, with larger and more profitable players acquiring smaller, often capital hungry fintechs, has contributed to the number of independent fintech firms operating in Australian down to 767 (from a previous high of over 800 firms in 2022) – a more sustainable level for the size of the local market and current economic headwinds affecting the sector. The majority of the decline, was due to fintech firms ceasing operations (~4.5%), with a smaller proportion of firms being removed from the landscape due to M&A activities (~3%).
While we continue to see financial institutions cooperating with fintech firms, the focus has shifted away from themes such as customer acquisition and growth, to cost management, compliance and profitability. Additionally, rate cuts which were previously expected during 2024 have not transpired due to inflation being stickier than previously expected, adding pressure to an already complex capital raising environment.
Overall, current investor market sentiment is still leaning towards caution and safer investments, with VCs still wary when it comes to investing, not just in fintech, but across the FS landscape more broadly.
Looking ahead, and with elections looming locally (and indeed in a number of global geographies), the market is likely to continue to remain cautious in the near term. But with the possibility of a monetary policy easing commencing in 2025, we could be close to the end of this market cycle, with investment expected to ramp up as the cost of capital decreases and the wider Australian fintech landscape presents as a more sustainable and competitive marketplace.
Fintech sectors in focus
Areas of focus for the financial technology industry in Australia include:
Payments
As of 2024, the payments sector continues to lead the Australian fintech landscape both in terms of number of firms and the deal value of investments has managed to attract. Featuring firms such as Tyro, Cuscal, Zip and Airwallex, this sector is by far the most mature within the fintech landscape, with over 150 active firms headquartered in Australia and representing roughly 20% of the total landscape.
Over the course of 2024, this sector has benefited not only from local investments but also from overseas ones – an example of which would be the acquisition of A2B by Singapore based ComfortDelGro, a leading multi-modal transport operator.
However, given the scale of the sector and maturity of the sector, new regulation is expected to be introduced to ensure payments services providers are appropriately regulated and are provided with a clear framework as well as a levelled playing field on which to operate.
Regtech
In 2024, we have witnessed a rise in investment in the regtech sector, with risk and compliance factors driving the need for these providers in emerging and mature organisations alike. The regtech space was, in fact, the only fintech subsector which saw global investments increase in the first half of 2024.
In Australia, the regtech sector is still the third largest with approximately 80 active participants. As the year progressed, we have seen a continued focus on the deployment of regtech solutions, as risk and compliance functions seek to deliver greater organizational value while lowering the cost of compliance and at the same time reducing the risk of non-compliance.
Regtech firms have increasingly been looking to leverage AI to manage upcoming and expected regulation in a cost-effective manner, while at the same time managing their risk profile. The constant evolution of regulatory frameworks, coupled with the increased complexity of reporting requirements, particularly for international fintechs, will likely translate into increased interest and investments in this space for the foreseeable future.
Blockchain and cryptocurrencies
The blockchain and cryptocurrencies space was the hardest hit in the Australian fintech landscape, decreasing by 14% YoY with 74 active firms as of 2024. Despite that, the Australian blockchain and crypto sector features some high-profile players, with a diversified portfolio of products and services such as Independent Reserve, SwyftX and CoinSpot.
Globally, this year the spotlight shifted from blockchain technology to AI, with investors deploying capital in the ever increasingly important AI space to convert their business into a forward-looking and AI-capable one. However, after a few significant and adverse events for the sector in previous years, this year the SEC approval of the Bitcoin ETF could act as the positive catalyst the blockchain space needs.
Furthermore, with a series of rate cuts that have already commenced in a number of geographies, and likely to commence in Australia as well, this could free up capital that has been sitting on the sideline and which could potentially be deployed back in the sector, as the risk-free rate falls making alternative investments more attractive.
Australian fintech 2024 summary table
| Categories | 2024 | 2023 | YoY Delta % | % of Total |
|---|---|---|---|---|
| Neobank | 5 | 6 | -17% | 1% |
| Regtech | 51 | 51 | 0% | 7% |
| Middle and Back Office | 73 | 80 | -9% | 10% |
| Insurtech | 39 | 40 | -3% | 5% |
| Fundraising | 18 | 18 | 0% | 2% |
| Lending | 132 | 142 | -7% | 17% |
| Payments | 154 | 161 | -4% | 20% |
| Capital Markets | 47 | 51 | -8% | 6% |
| Data and Analytics | 53 | 60 | -12% | 7% |
| Personal Finance Management | 45 | 48 | -6% | 6% |
| Blockchain and Crypto | 73 | 85 | -14% | 10% |
| Wealthtech | 77 | 85 | -9% | 10% |
| Total | 767 | 827 | -7% | 100.0% |
KPMG Australian Fintech Landscape 2024
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