Australian fintech investment in 2020 remains strong through COVID at US$1.4 billion
Investment in Australia’s fintech sector was strong at US$1.4 billion in 2020, despite a fall from a record $2.09 billion in 2019 as the COVID-19 pandemic impacted activity across Venture Capital (VC), mergers and acquisitions (M&A) and Private Equity. A very strong fourth quarter of 2020 included the US$577 million acquisition of B2B payments company eNett by US-based WEX, a US$209 million funding round by neobank Judo Bank, and a US$84 million raise by solar power financing company Brighte.
The KPMG Fintech Landscape 2020 showed an increase in the number of fintechs active in Australia, with 733 fintechs recorded – up from 629 at the end of 2019. Fintech ventures in Australia continued to see strong interest from investors, particularly in areas like payments and business lending. Instalment finance (Buy Now Pay Later) has also seen substantial growth with leading Australian players such as AfterPay and Zip continuing their expansion offshore in markets such as the US, UK and Canada.
“Fintech investment across venture capital, private equity and M&A has increased dramatically over the past five years, from just US$130 million in 2015 to US$1.3 billion in 2020,” said Dan Teper, KPMG Australia Head of Fintech. “This growth has been possible thanks to a number of factors, from government and industry support for innovation to the maturity and complexity of Australia’s financial services sector. We have seen the momentum built up at the latter end of 2020 continue into this year, with major acquisitions taking place in the market and continued support for the sector helping to spur innovation from startups and incumbents. Overall, we expect to see more investment fuel the emergence of Australia’s fintech ecosystem in both the short and long term.”
2020 Global fintech investment highlights
- Global fintech investment was us$105 billion in 2020 – the third highest year on record despite a significant drop compared to US$165 billion in 2019.
- While M&A deal value dropped in the first half of 2020 (US$10.9 billion), it rebounded to over $50 billion in the second half of the year, led by the US$22 billion acquisition of TD Ameritrade by Charles Schwab and the US$7.1 billion acquisition of Credit Karma by Intuit.
- VC investment in fintech globally rose year-over-year – from US$40 billion over 2,834 deals to over US$42 billion investment across 2,375 deals.
- Corporate-participated venture investment in fintech was extremely strong in 2020 at US$21 billion, with both the Americas (US$9.7 billion) and EMEA (US$4.8 billion) seeing record annual levels of CVC investment.
- Global investment in cybersecurity quadrupled – from US$500 million in 2019 to over US$2 billion in 2020.
A bright future for global fintech projected, with exits on the horizon
Given the increase in demand for digital payments, contactless payments and e-commerce platforms, global fintech investment is expected to remain robust well into 2021. Corporate investment is expected to be particularly strong as incumbent businesses continue to work to accelerate their digital transformation efforts.
In addition to payments and platform models, B2B solutions are likely to attract investment globally in 2021, including areas such as embedded finance and ‘buy now, pay later’ solutions. Blockchain is also expected to gain traction as blockchain-based solutions and digital asset offerings become more mainstream. In October 2020, Australia-based investment platform STAX complete the first cryptocurrency backed IPO on for West Coast Aquaculture Group – a marine farming business with operations in Malaysia.
“Given the strong valuations that tech companies are getting in the public markets, exit activity is going to increase significantly in 2021, particularly in terms of IPOs. Already in H1’21, we’ve seen a number of unicorn fintechs looking to go public – whether through traditional IPOs or through SPACs – and we’re likely to see more,” said Ian Pollari, Global Fintech Co-Leader, KPMG. “We’re also going to start seeing a rebound in M&A activity across the board as smaller fintechs consolidate, incumbents look to acquire capabilities to speed up their digital transformation efforts and larger fintechs embrace M&A as a mechanism for growth.”
All figures referenced in this article are in USD