We never forget our international vocation and today we go very far geographically but very close in terms of interests and objectives with an interview dedicated to fintech opportunities in Australia with Matteo Musso, Associate Director, KPMG Sydney.
Let’s start by exploring the fintech landscape of this country
The number of fintech companies in Australia has increased from around 100 in 2015 to more than
700 in 2020. In this context, there are some sectors in particular that stand out, in which fintechs in
Australia have succeeded in positioning themselves as world leaders, due to their capacity to
innovate and offer value-added technological solutions to their clients. Within those sectors that
stand out, there is the payments sector, particularly Buy Now Pay Later (BNPL), the small business
lending sector, digital banks (also known as neo-banks), as well as the blockchain and cryptocurrency
sectors. With respect to investment, in 2020 Australia attracted 2 billion dollars of investment in the
fintech sector. This means investment in the fintech sector increased by more than 250% compared
to the previous year. In Italy in the same period, there was 150 million euros of investment. These
factors indicate that the Australian fintech sector boasts not only a large variety of players with
cutting edge technological solutions, but is also a sector with strong growth and the capacity to
attract global investment.
What opportunities does Australia offer in the payments industry?
The payments sector is the sector that boasts the greatest number of companies in the Australian
fintech sector. The strong growth we have seen in this sector is primarily due to the fact that in
Australia, most payments are electronic and Australians are used to using advanced payment
options that are also offered by the major banks. This has resulted in the creation of fertile territory
for the proliferation of payment companies within the local ecosystem. There are some data we can
analyse to further understand this phenomenon. For example, it’s possible to observe in Australia
that cash is used in only 27% of cases, and this percentage drops further to only 5% of cases if we
look at the part of the population that ranges from 19-39 years of age. In Italy, cash is used in more
than 80% of cases. For these reasons, we are convinced that Australia has the potential to become a
world leader in the payments sector. Some examples of Australian companies in this sector are Tyro
Payments, Zip and Afterpay. Recently we have also seen the acquisition of an Australian player by
the US global payments giant Square, which acquired the Australian company Afterpay for more
than 39 million dollars, which is not only the largest acquisition in Australian corporate history, but is
also one of the largest deals in the fintech sector.
What opportunities are there in the SME lending sector?
In Australia the small and medium enterprises (SME) sector is represented by more than two million
businesses employing around 5 million Australians. With respect to the sector regarding loans for
small businesses, we can see that one in four businesses are refused credit by the major Australian
banks. This is due to the fact that small businesses are often considered as less profitable and high
risk. This has created a ‘funding gap’ of around 90 billion dollars, which represents the amount of
credit that small businesses are unable to access via the main Australian lenders. This creates fertile territory for fintechs focused on the sector of small business (SME) lending, in that this funding gap is
considered to be a significant opportunity for investment and innovation in a market that at the
moment isn’t covered by the principal players in the sector in Australia. For this reason, in recent
years we have seen a proliferation of fintechs in the small business (SME) lending sector, offering a
value proposition with a strong technological component, with the objective of allowing small
businesses to have rapid access to credit. Some examples of SME lending players in Australia include
Moula, Judo Bank and Prospa. In our view, this is one of the sectors in which we will see significant
growth and innovation.
In collaboration with the Australian Trade and Investment Commission (Austrade) – for more information about opportunities to grow and expand in Australia, please visit: https://www.globalaustralia.gov.au/industries/financial-services-and-fintech