Fintech Investing in Australia

What should investors know about Australia's fintech market?

This year has been a year of change for fintech in Australia, seeing significant rebounds and gains, but with some possible frustrations or roadblocks, according to KPMG's latest Fintech Landscape report.

It's clear that fintech is booming as Australians look for new ways to combine finance and technology. The Australian Banking Association (ABA) reports that over one-third of Australians use digital wallets now. A 2020 Finder report issued in October put that number at around 20 percent of the nation. That’s an increase from around 20 percent to more than 33 percent.

The COVID-19 pandemic has played a role in Australia's fintech growth. As fear of transmission took hold, the country saw a huge drop in the use of cash, with Australians using fintech solutions to pay for their items and services. According to the ABA report, more than 80 percent of Australians prefer online methods for banking and bill-paying, while the Finder report states that 30 percent of Aussies have connected their debit or credit cards to their smartphones or watches.

The rise of open banking has also been a boon for the industry. Under open banking, which formally commenced in mid-2020, customers can securely share banking data with other accredited banks and fintech companies, allowing for greater financial agency.

What are the pros and cons of fintech investing in Australia?

Globally, as more and more people grow comfortable with online and digital finance systems, and as more of our modern life joins the realms of cyber-space, we can expect to see fairly steady increases in the sector. It takes little imagination to see the constant digitalisation of our culture.

For Australia specifically, KPMG’s report highlights the sector's “resilience and growth” and shows positives such as 95 percent of surveyed fintech companies stating that they plan on hiring in the next 12 months and 67 percent of fintech companies expecting to raise capital in this year.

The report also warns, however, of what it calls “headwinds” that could slow down the fintech sector. KPMG notes that the sector is “dynamic,” and the change and growth are bringing about stiff competition. Furthermore, with an “unsustainable” number of fintech companies, that competition will be hard-fought, and could bring about some rapid shifts of power, and result in swift winners and losers in the sector.

What are the biggest ASX-listed fintech stocks?

Australia's fintech market is on the move, and for investors looking to jump into the space it may make sense to start with the biggest players before going on the hunt for smaller-cap stocks with future potential.

Here's a brief look at the biggest ASX-listed fintech stocks by market cap; these companies were taken from an aggregate of sources commenting on Australian fintech.

Data was current as of October 19, 2022.

What is the outlook for Australia's fintech market?

So what's next for this exciting industry? In an October 2021 report, EY states that Australia continues to “mature rapidly,” and notes that it has been pulling through the challenges of COVID-19. The industry has been able to sustain its revenue base with more paying customers and global expansion plans.

Challenges moving forward include regulatory concerns and competitive pressure, with EY noting that, “Government incentives, industry collaboration, global talent acquisition and increased diversity will be critical to sustaining the sector’s global growth trajectory,” will be key if the sector is to continue advancing in the land down under.

If market participants can rise to meet those obstacles, those interested in the Australian fintech market can rest assured of finding future opportunities.