Australia leads non-core markets in fintech investment deals, but what does the sector need to grow?

Prospa

Prospa chief executives Beau Bertoli and Greg Moshal. Source: Supplied

Australia has emerged alongside Brazil as a leading fintech market after facilitating the largest fintech investment deals outside of the core markets of Asia, Europe and North America in the past 12 months, a report from CB Insights has found.

The Global Fintech Trends report analysed global trends and found that half of the 10 largest fintech deals outside of core markets took place in Australia between the second quarter of 2016 and the second quarter of 2017. The remaining four took place in Brazil, and one took place in South Africa.

Online small business lending platform Prospa topped the five Australian deals that made the list with its AirTree Ventures-led $25 million Series C raise, while loan quote platform SocietyOne was close behind after raising $24 million in a Series C funding round early last year.

Melbourne-based Forex startup AirWallex was next in line, securing a $17.4 Series A funding round in May, followed by Sydney digital mortgage startup Uno, which raised $16.5 million from Westpac last September. Payments platform Assembly Payments, which closed a Carsales-led $14 million Series A last June, rounded out Australia’s representation in the list.

Australia has been leading the charge for the establishment of a robust fintech sector, with the Victorian government recently announcing a future fintech hub and festival, Stone & Chalk revealing plans for an “agri-fintech” hub to “accelerate and amplify” the fintech ecosystem, and the Australian Securities and Investments Commission inking fintech cooperation agreements with Malaysia, Japan and Hong Kong to encourage international fintech expansion.

Meanwhile, on the demand side of the equation, Australian consumers have been eager to embrace fintech, ranking fifth in the world for fintech adoption, with one in three digital consumers using fintech technologies.

The future of fintech

Prospa co-chief executive Beau Bertoli says Australia’s fintech sector has come a long way since the startup first launched five years ago, to when it raised $25 million in funding in January.

“When we started five years ago there wasn’t an Australian VC market — we had to look offshore and bring in offshore money,” Bertoli tells StartupSmart

“More recently there’s been a real flurry of money flowing in to venture capital.

“Fintechs are exciting: financial services makes up a huge market, and it’s an important category for us to keep winning in,” he says. 

The impetus for Australia to continue developing its fintech sector comes as a precautionary measure in a time when the likes of multinationals such as Amazon, Spotify, Uber and Airbnb can swiftly dominate Australian markets, according to Bertoli.

“If Australia doesn’t get a strong fintech community up and running the rest of the world will do it anyway – [companies like] Uber and AirBnb can pop up in a country in a heartbeat and dominate the market,” he says. 

In order for this to happen, Bertoli would like to see greater government support mechanisms for budding fintech startups to challenge the big banks.

“If there’s any industry ripe for destruction in Australia it’s finance … it’s dominated by very established players,” Bertoli says. 

“For the industry to thrive, government can come out and help support businesses by establishing a level playing field against the big players.”   

While this financial year’s strong investment figures may suggest a robust fintech ecosystem, reports show Australia is trailing behind global standards for the overall amount of venture capital invested in startups. Last year saw a record $516 million invested from the venture capital sector in Australia, but this amounted to 0.023% of Australia’s gross domestic product, which is less than half of the 0.049% OECD average, according to a report released by AVCAL.

However, Bertoli maintains that Australia will see “more and more investor activity” in the coming years as the “market matures.”

“[There are] hundreds of startups trying to get going in this space and I think there’s an enormous appetite both from government and investors to really see fintech flourish,” he says. 

“We’re going to see a lot of change — change is one of those things that quite often takes a lot longer to happen than you think, but when it happens it’s far faster than you’d expect.” 

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