Australian fintech has a great start to 2017
I know its not polite to brag, but here at FinTech Australia we couldnt help ourselves and decided to celebrate what really has been a great start to 2017 for our industry.
As a result, weve prepared this infographic to give you all a snapshot of some of the industrys significant achievements in the first six months of 2017, along with whats coming up for the rest of the year and in 2018.
Our take is that 2017 has been a year when the Australian fintech industry moved beyond the embryonic stage, and began to seriously penetrate the Australian financial services market.
Were also pleased to observe that a number of important international benchmarking reports showed we were out-performing the rest of the world in two important metrics – capital investment and consumer adoption.
Among some of the outcomes highlighted in the infographic include:
- KPMG Internationals Pulse of FinTech report showing that the Australian fintech industry had a 254% year-on-year increase in capital investment in 2016, versus a global fintech investment decline of 47%.
- The StartUp Muster report showing that fintech was the number one industry sub-sector in Australia targeted by founders and investors in 2016.
- Sydney and Melbourne increasing their ranking in the Global Financial Centres Index, with Sydney now in the world top ten.
- Australia jumping ahead of Hong Kong, Singapore and the US in the EY FinTech Adoption Index, indicating that fintech is increasingly becoming the first financial services choice for many Australians.
- The Australian Governments 2017-18 budget including a series of major fintech-friendly announcements, including an expansion of Australias fintech regulatory sandbox and a commitment to implement an open financial data regime in 2018.
The infographic also outlines some of the major company equity capital raises coming from the Australian fintech industry during the year.
What the infographic doesnt cover is some of the individual company market penetration milestones which were announced during the first half of 2017. These milestones illuminate the fintech areas which are really going gang-busters.
Our business lenders had a particularly busy six months, catering to a market which was simply ignored or deemed unprofitable by the big banks for many years.
For instance, this month, marketplace lender SocietyOne announced it had broken through $300 million in loan originations and recorded 67 per cent annual growth in quarter two of 2017, compared to the same period last year. They have also been giving investors a stellar 9-10% return when even the ASX200 returned just 7%.
Meanwhile, Timelio announced in July it had funded $100 million in invoices through its peer-to-peer platform since launching two years ago. The company said the volume of invoices in the second quarter of 2017 increased by 50 percent on the previous quarter.
Business lender Spotcap in May announced it had provided more than $50 million in credit, since it began operation in 2013, while personal lender MoneyMe in announced it had provided $100 million in loans to its primarily millennial customer base.
We know, however, that many of our other fintech companies – across diverse areas such as wealth and investment, payments and regtech – have also seen strong customer growth.
For instance, micro-savings app Acorns now has more than 275,000 users, while budgeting app Pocketbook has more than 300,000 users. Separately, Brisbane-based startup Living Room of Satoshi reported that Australians have paid over $5 million of everyday household bills with Bitcoin since the company launched in 2014.
Our wealth and investment members are beginning to make serious inroads into the traditional financial advice industry, including being seen as partly responsible for under-whelming financial results this year from AMP.
There are two important trends underpinning these results.
Firstly, customers are no longer simply turning to Australias big four and other traditional providers for their financial service needs.
This fact was underlined in the EY FinTech Adoption Index, which shows that the percentage of Australians who prefer to use a traditional financial services provider dropped from 23 per cent in 2015 to 10 per cent in 2017.
This puts Australia second only to the United Kingdom when it comes to customers preferring alternative financial services providers.
Clearly, younger people are making the charge towards fintech. The EY report found that user of fintech products is higher among younger users, in particular those aged between 25 to 34. It notes that these people are not only tech-savvy digital natives, but are also at the age where they have a greater need for financial services.
Secondly, we are starting to see the impressive outcomes of increased international investment into Australian fintech, particularly from China.
The largest of these was a $US13 million capital raising for Melbourne-based payments company AirWallex, including from Chinese internet giant Tencent Holdings and venture capital firm Sequoia Capital China.
Thats not to say there isnt an incredible amount of work which needs to be done to build the Australian fintech industry and, whats more, prepare our Financial Services sector for the intense competition which is likely to be posed by the Chinese Dragons, WeChat and Ant Financial, and Silicon Valley powerhouses such as Apple, Amazon, Google and Facebook.
The EY FinTech Adoption Index, for instance, notes that – although market penetration is healthy – that consumer awareness of Australian fintech products could be improved.
Furthermore, there are many other regulatory and broader eco-system obstacles which remain, including the need to:
- Boost the number of joint projects between the big banks and fintech startups, given that our members say this is one of the biggest barriers to growth
- Increase gender diversity across the industry, which will unlock even more great talent and contribute more ideas toward industry problems
- Continue broader regulatory reforms, including creating a robust and secure open financial data framework which encourages fintech innovation and delivering an expanded regulatory sandbox
- Encourage and support our members to go global
Well be discussing these are many other issues at our inaugural national fintech festival, Intersekt, which is being held in Melbourne from 27 October to 3 November. Were hoping for more than 1,000 participants at this week-long festival, which will culminate in our two-day Collab/Collide Summit.
In conclusion, there is no guarantee our run of good news will continue. But were keen to celebrate it while we can.
Plus you can download the infographic and each of its elements here.
* Simon Cant is the President of FinTech Australia