Set up for success: Australia’s booming fintech sector

Over the last year, fintech has boomed. The vertical attracted a record US$34 billion in venture capital in the second quarter of 2021 alone.

In Australia, where the tech sector has grown big enough to generate around US$120 billion for the economy, opportunities for fintech startups – and their investors – abound. In fact, fintech has grown from a US$187 million sector to a US$3 billion industry between 2015 and 2021, according to national fintech association Fintech Australia.

Photo credit: Frances Gunn

As a result, the country has shot to the top of the 2021 global fintech rankings by data analytics company Findexable. Australia currently sits in sixth place globally and occupies the second spot in Asia Pacific.

Nurtured growth

The number of new fintech firms in Australia has grown to 730, which include well-established unicorns like digital payments firm Airwallex, buy now, pay later (BNPL) company Afterpay, and insurance firm Cover Genius.

And these players have been making a lot of noise. Afterpay, for example, has driven US$4.5 billion in net benefits to its merchants in 2021 alone, while Cover Genius has recently partnered with Indian ecommerce major Flipkart to provide insurance coverage for furniture products sold on the platform.

And despite international headaches over Covid-19, money continues to pour into the sector. Airwallex raised US$100 million from a host of investors in November last year, while green energy-focused point-of-sale company Brighte bagged the same amount a month later.

“The fintech industry originally set out to disrupt the traditional financial services industry,” says Stephen Skulley, the senior trade and investment commissioner at Australia’s trade and investment commission, Austrade. “However, in recent years, we’ve seen a shift toward collaboration.”

Stephen Skulley, senior trade and investment commissioner at Austrade / Photo credit: Austrade

He points out that initiatives like Westpac Bank’s Reinventure and the National Australia Bank Ventures demonstrate that fintech firms are not separate from Australia’s US$7 trillion financial services sector but are a natural extension of it.

All this growth is partly due to the Australian government’s systematic effort to foster the digital ecosystem through regulation, talent, and bilateral connections.

Innovation-friendly regulations make it easy for startups to access licenses to offer credit and financial services. And Australia’s partnerships with countries like the UK and Singapore cultivate opportunities for businesses in both territories as well. In June last year, Australia and the Monetary Authority of Singapore started negotiations over a “Fintech Bridge” that would enhance and encourage innovation and business opportunities in the two countries.

Australia’s tech talent pool also ranks highly, placing eighth in both the UN’s 2020 Human Development Index and Cisco’s annual Digital Readiness Index, which measures the skills needed to support digital innovation.

“Our greatest asset is our creative, resourceful, and enterprising people,” says Skulley. “We use our global ties to connect with the best the world has to offer.”

Fintech as a bridge to the region

Not only has the Australian government supported fintech firms in the country, it has also helped startups looking to expand abroad. This is important as areas like Southeast Asia are set to experience significant growth. Case in point, the region’s internet economy is poised to double to US$363 billion by 2025.

Skulley points to Australia’s proximity to North and Southeast Asia as the reason the country has been recognized for its “culturally sensitive and multilingual” workforce that understands the importance of these overseas markets. This is an important factor that has helped open doors for businesses in the wider region.

“I think a lot of people in Australia do have an understanding of how important the Southeast Asian market and the region is to growth,” says Tasneen Padiath, managing director for Southeast Asia at Australian BNPL firm Zip. “That’s certainly built a lot of bridges.”

Tasneen Padiath, managing director for Southeast Asia at Zip / Photo credit: Zip

Zip conducted an internal study and found that there are 90 million customers in Southeast Asia who want BNPL options, prompting the firm to plan its expansion into the market. Its first foray into Southeast Asia was through an investment in Philippine firm TendoPay, which later led the company to open an office in Singapore.

According to Padiath, the transition was smooth due to the support of Singapore’s Economic Development Board and Austrade. Austrade not only provided intelligence and data reports on each market but also the crucial contacts the company needed to hit the ground running.

“We shared our plans with Austrade quite openly because we knew that they could be a support for us,” she says. “They were very well-connected to the [Singaporean] government, regulators, and key corporates. Austrade has championed us as we look to make those connections in local markets.”

“On the cusp of things”

Padiath says that Zip will continue to work together with Austrade as the BNPL company expands throughout Southeast Asia.

“I think we’re on the cusp of things in Southeast Asia – we see a lot of opportunity in terms of payments here,” she says. “Cashless transactions have increased 30% to 50% since the pandemic and lending is also forecasted to grow.”

Padiath believes that Australian fintech companies are well-placed to take advantage of the opportunities around them. She points out that over 80% of Australian fintech firms have been around for three or more years, a sign of maturity and growth in the sector.

“I think it’s pretty obvious that Australian fintechs are becoming internationally competitive now,” she says. “We’ll definitely see more and more global fintechs coming out of Australia.”

For Austrade’s Skulley, the future for Australian fintech businesses clearly lies abroad, as more than 70% of companies look to expand internationally, according to a 2021 census by management consultancy Ernst & Young.

The Australian government, Skulley says, views the fintech sector as a driver of economic recovery. Over US$6 million has been set aside in the 2020-2021 Federal Budget over the next four years to support the fintech and regtech industries, and the Technology Council of Australia has published a roadmap detailing how it will create a million more tech jobs.

“The data shows that when it comes to working internationally, Australian fintech doesn’t simply ‘show potential’ – it is now succeeding internationally and growing,” he affirms.

The Australian Trade and Investment Commission (Austrade) is the Australian government’s agency for promoting trade, investment, and international education both at home and abroad. Austrade advocates for the unique strengths of Australian fintechs and the value they will bring to new markets.

To discover what Australia’s best and brightest fintechs can do for your business, visit Austrade’s website.

This content was produced by Tech in Asia Studios, which connects brands with Asia’s tech community. Learn more about partnering with Tech in Asia Studios.