Aussie fintech investment reaches $3 billion after 250% growth… but don’t celebrate just yet

Investment into Australian fintech has increased by a massive 252% year-on-year, according to a KPMG report, reaching a record high of $2.9 billion in 2019.

KPMG’s Pulse of Fintech H2 2019 report measures investment activity, including venture capital, private equity and mergers and acquisitions, and shows a huge jump for 2019, compared to $1.14 billion invested in 2018.

Dan Teper, KPMG head of fintech for Australia, called 2019 a “breakout year” for the Australian ecosystem, pointing to innovation in the banking and lending space, as well as in property, insurance and superannuation.

Indeed, there has been a flurry of activity in the Australian neobank scene over the past 12 months or so, with challengers Xinja, Volt, 86 400 and Judo all securing their full authorised deposit-taking institution licences and launching their early products.

We’re also seeing lending services such as Athena — noted in the report for its $70 million Series C round in October, while alternative superannuation providers are also emerging.

Australia is bucking the international trend here. On a global scale, fintech investment actually dropped slightly, from $US141 billion ($213.4 billion) in 2018 to US$135.7 billion ($205.3 billion) in 2019.

This could be read as a positive for Aussies. But, don’t celebrate too soon.

Leaders in this space have admitted that fintech here is just a little behind the curve. Could it be possible that we’re just catching up with the fintech boom in Europe and the US that peaked a few years ago?

And, if that’s the case, are we heading for a similar dip within the next five years?

Equally, it’s currently not clear how this investment into Australian companies is distributed, in regards to both how many transactions were completed, and how many of these deals were mergers and acquisitions.

However, the report does note the acquisition of property exchange PEXA for a reported $50 million as a significant transaction.

Globally, the value of M&A deals reached a record high of US$97.3 billion ($147.4 billion), up from US$91 billion ($137.7 billion) in 2018. However, the number of M&A deals dropped significantly, from 622 to 426.

It’s possible this plays into a wider trend in Australia and worldwide of more and more money being invested in scale-ups, with average deal sizes increasing and volume decreasing.

If more money is being invested into M&A activity, that could prove to be just another promising headline figure veiling a problem for the Aussie, and global, startup ecosystem.

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