Australia’s booming fintech sector has fast become a global hub for fintech activity. Recent statistics show the industry has witnessed a five-fold increase in the number of fintech companies in just five years, now worth more than US$4 billion (AU$ 5.87 billion) and ranking sixth globally, as well as second in the Asia Pacific region.
But what makes Australia a ripe environment for fintech innovation? Several factors play a part – Australia benefits from a rich ecosystem that is diverse and multinational; the region is home to a range of startups and scaling companies across several different fintech subsectors, and its readiness to take on new businesses has attracted record investment levels.
Demand in the region has also been a key influence. Australia has been an early adopter of financial services innovation and technology, allowing fintech companies to rapidly scale and embrace new digital models and payment solutions to meet growing consumer interest.
Regulation to support innovation
Australia’s payments regulation is being overhauled –allowing for greater transparent access to fast payments infrastructure.
This, in return, will allow fintech startups to innovate, create new offerings, and drive strategic partnerships with international companies for greater transparency in payments and frictionless experiences for consumers.
Sanjeev Kumar, chief product officer at Zai, an Australian-based global fintech company delivering embedded finance orchestration, believes a guiding principle of the sector’s growth is that regulation has enabled innovation.
“Regulators have been proactive and nimble in terms of their decision-making to bring in greater innovation and launch the right products at the right time,” he says.
“Australia has experienced tremendous growth over the last few years. The financial industry is a completely different spectrum altogether – from developments in challenger banks and merchant payments, there is a multitude of successful platforms disrupting within the sector, and fintechs are now given the foundation to launch these platforms for a quick adoption in the market.”
International hub for global talent
A recent EY survey found the talent market in Australia is growing significantly year on year, despite setbacks and an increase in talent shortage amid the Covid-19 pandemic. In the last 12 months alone, 88% of Australian fintechs generating revenue overseas have created new jobs as a result.
“I’d say one of the biggest assets that Australia has is its talent pool,” says Kumar. “The growing fintech sector is continuously attracting multinational talent from across the globe, with Australia conveniently located on the doorstep of Asia, a key market for innovation within fintech and payments, making the region a great location for talent looking to relocate.”
And it is clear to see why – Australia has a significant pool of tech professionals, and people with deep financial services expertise. The region is also integrated with financial ecosystems around the world, with both Australian companies going abroad, and international companies expanding into Australia.
Kumar adds this plays into the hands of companies looking to expand their regional headquarters and explore partnerships with overseas firms.
“Another key driver of drawing in talent is the ease of doing business in Australia. Licensing regulatory hurdles are not as stringent if businesses have their policies and processes, and it is relatively easy to get the necessary licenses to operate within the payments sector.”
Zai’s expansion was aided by the Australia’s Trade and Investment Commission (Austrade). Providing on-the-ground advice, Austrade was able to provide Zai with the connections it needed within its target market while helping the fintech gain a better understanding of the local business landscape.
Capital investment soars
Australia’s overall capital raise for startups and businesses has been recognised on a global scale, with 44% of companies having raised over US$10 ($AU 14.68) million to date and 14% having raised over $100 million.
Also, 88% of Australian fintechs that are three years or older and 81% of fintechs two years or older are also now post-revenue, showing a promising sign of the sector’s continuing maturity and growth.
A further 40% of fintechs within Australia are now generating revenue from overseas, with 18% getting more than half their revenue from international customers. “It is the perfect triumvirate with the government, regulators and businesses all aligned,” says Kumar. “They have created the infrastructure and foundation for innovation.”
Disruption in the payment sector
Australia’s largest segment within the fintech sector was recorded to be within digital payments, with e-wallets and the supply chain part of the most common type of fintech (43%), followed by lending (30%).
The sector’s total transaction value is forecasted to be US$92 billion (AU$135 billion) in 2022, with the number of users in this sector also expected to grow significantly to hit 21 million users by 2026.
Other sectors are also growing fast, including ‘buy now, pay later’, open banking, insurtech and decentralised finance.
“The buy now pay later sector came into Australia around five years ago. Now we have a myriad of Australian startups disrupting within the sector, both locally as well as globally to ultimately disrupt within a much bigger ecosystem,” says Kumar.
There have been several fintech partnerships too – Pollinate teamed up with National Australia Bank to provide a tech platform for smoother banking for small and medium sized enterprises (SMEs).
The Australian government has taken a more proactive stance to encourage competition and innovation in financial services too,
The recent Consumer Data Right (CDR) Bill by the Australian Parliament has cultivated the open banking and payments sector, which will likely advance the digitalisation of the country’s banking sector.
The Australian Trade and Investment Commission (Austrade) accelerates the growth of exporters, attracts foreign investors, and stimulates the visitor economy.
To discover how Australia’s fintech brilliance can help your business, visit austrade.gov.au/fintech