Australia FinTech Report 2021 – Executive Summary

AUSTRALIA FINTECH REPORT
Australia
FinTech Report 2021

Introduction
With over 550 active FinTech companies, Australia has the most prolific FinTech landscape in APAC,
outside China and India. Our research shows that Australia ranks fifth in terms of the total number of
new FinTech startups founded since 2015. Though one might think that is a big number considering
the small population (a little over 25 million), FinTech adoption in Australia is high. As of 2019, over
58% of the digitally active adult population used FinTech products and services, as per the Global
FinTech Adoption Index. Only 13% of the digitally active adult population used FinTech products and
services in 2015. COVID-19 has inarguably accelerated FinTech adoption.
2
0
500
1,000
1,500
2,000
2,500
US INDIA UK SINGAPORE AUSTRALIA
Number of New
FinTech Startups
Founded
(2015-H1 2020)
Here are the three key factors driving FinTech growth in Australia:
1 Demographic Advantage:
With a median age of 37, the country has a demographic advantage that reflects clearly in its
adoption of digital services. As per Cisco Global Digital Readiness Index, Australia has consistently
ranked high among the top 10 countries in digital readiness and adoption across a wide set of
parameters.
2 Digital Infrastructure:
Sustained investments in foundational digital infrastructure—a major factor powering FinTech—
have promoted innovation. This report discusses the New Payments Platform (NPP), Consumer Data
Rights (CDR) piloted with Open Banking, and the Trusted Digital Identity Framework (TDIF) in detail.
3 A Progressive Approach to Policies and Regulations:
The Australian government and regulatory bodies, especially APRA and ASIC, have worked closely
with the industry to create a conducive policy environment for innovation and new business
models to take shape. The digital banking charter of APRA, which has led to the growth of the
neobanking sector, and the ASIC Innovation Hub supporting innovation across several FinTech
sectors are initiatives worth mentioning.

The Australian FinTech landscape is dotted by over 750 companies, with 550–600
active FinTechs. This report focuses only on the active ones and covers the top
sectors in detail. Lending and WealthTech, each with over 100 companies, are the
top two sectors and are followed by Payments & Remittances. Peer-to-Peer
companies dominate the Lending segment, and the pandemic has spurred activity
in the Buy-Now-Pay-Later (BNPL) space. With over $650 million of venture capital
funding since 2018, Lending has been the second-most funded segment in
Australia’s FinTech space, next only to neobanking.
Neobanking has emerged as one of the most discussed and debated segments in
the Australian FinTech landscape over the past three years. Modeled along the lines
of challenger banks in the UK, neobanks with ADI licenses attracted lots of
attention, both good and bad. With over $970 million in funding since 2018,
Neobanking topped the funding charts. SME segment-focused Judo Bank continues
to be the best performing neobank in the market. Although the segment started out
with much enthusiasm, with early sign-ups in large numbers, the closure of Xinja
and the acquisition of 86 400 by National Australia Bank have reignited the revenue
model debate in the neobanking segment.
Access to capital has historically been a growth barrier to Australian FinTechs. Since
2018, a total of $2.67 billion of VC funding has come into the FinTech sector. Of this,
$1.09 billion was collected in 2020 alone. The lack of access to early capital explains
the earlier-than-expected IPO of BNPL companies like Afterpay and Zip. Although
improved VC funding levels have been slowly reversing the situation, COVID-19 has
tightened the funding purses once again, urging several early-stage startups to pivot
into revenue-generating business models much earlier than they would have
desired. The failure to infuse the much-needed capital, aggravated by the onset of
the pandemic, was one of the reasons for Xinja’s exit. The FinTech community
expects the government to look deeper into the possibility of state funding, e.g.,
Victorian Startup Capital Fund, and public-private partnership funding models as
seen in the UK and the EU.
The 2020–2021 federal budget set aside AUD 2 billion for R&D tax-related incentives
exclusively to promote innovation and entrepreneurship. An EY study shows that
about 54% of FinTech startups have successfully applied for the benefit. However,
there is an increasing demand within the community to make access to this benefit
easier.
Market Perspective
3

Market Maturity
Data from multiple sources suggests that roughly 25% of active FinTech
companies in Australia are profitable. Roughly 78% of the companies are post-
revenue*, of which half of them demonstrated high double-digit growth until
the end of 2019. Though the pandemic stifled this growth, a better funding
environment, operational discipline, and increased focus on profitability
indicate an optimistic future. In addition, the percentage of paying customers in
at least 40% of these companies has grown since 2019*.
Regulators have frequently stepped in to steer the sector toward long-term
sustainability. Following Xinja’s exit from the market in early 2021, APRA
stepped in to tighten license requirements, a key ask being the mandatory
launch of revenue-generating products early in a challenger bank’s growth
trajectory. Higher capital requirements were also introduced as a requirement
though the market has been divided on this issue.
As mentioned earlier, access to capital has been a pain point for the Australian
FinTech sector. Much of the startup industry believes that higher capital
requirements will further weaken the sector. However, these policy changes can
potentially lead to the following three positive outcomes.
• Many companies would be forced to migrate to revenue-generating
business models, decreasing the reliance on capital. Growing focus on
lending and the emergence of BNPL is a clear indicator.
• More startups will prefer partnering with traditional incumbents instead of
taking the much harder regulatory licensing route. As Open Banking evolves,
collaboration within the entire ecosystem will improve. An increasing
number of neobanks are in the works, many of them integrating atop
incumbent financial institutions, is an example of this scenario.
• The focus on profitability and growth will also force them to explore foreign
markets for business. Breaking into new markets can be fast-tracked through
government-led initiatives such as the UK-Australia FinTech Bridge program,
which will provide companies easier access to the UK market.
*EY FinTech Census 2020
4

971.8
659.5
482.3
151.9 149.7
74.5
50.1 47.0
83.6
15
48
7
35
19
7 10
13
55
Neobanks/Digital
Banks
Lending
Remittances
WealthTech
B2B
FinTech
Cybersecurity
Payments
InsurTech
Others
Funding Amount ($, Mn) No. of Deals
437.1
765.2
1,090.5
377.6
58
66
57
28
7.5
11.6
19.1
13.5
2018 2019 2020 2021(*Until May)
Total Funding ($, Mn) No. of Deals Avg. Funding ($, Mn)
Australian FinTech firms raised over $2.67 billion in funding between 2018 and May
2021. The neobanks/digital banks segment leads FinTech funding in the country; it
has raised $971.8 million from 15 deals over the past three years. Judo Bank led the
funding charts and raised $215 million in its Series D in December 2020; it secured
$286 million in Series B in July 2019. Remittance startup Airwallex came in second in
the funding race by raising $480.72 million in its Series B, Series C, and Series D
funding rounds over the past three years.
5
Segment-Wise Funding Analysis
Note: The total number of deals
includes deals with undisclosed
amounts and excludes debt
funding, convertible bonds,
grants, ICOs, and IPOs.
Funding by Year
(2018–May 2021)
Note: The total number of deals includes deals
with undisclosed amounts. It excludes debt
funding, convertible bonds, grants, ICOs, and
IPOs. * The ‘Others’ segment includes
RegTech, Cryptocurrency,
Loyalty/Reward/Coupons, Digital Cards,
Crowdfunding, and BankingTech.
Funding by Segment
(2018–May 2021)
Total VC/PE Funding = $2.67 Bn
No. of VC/PE Deals = 209

Banks/ FIs Techs/ FinTechs
VCs/PEs
6
Active Investors (2018–May 2021)

Name IPO Year IPO Funding Segment
2015 $5 Mn Lending
2006 $173 Mn Payments
2019 $86 Mn Lending
2019 $40 Mn Lending
2019 NA Lending
2015 NA Banking
2016 $43 Mn Lending
2020 $36 Mn Lending
2019 $4.7 Mn Neobank
2020 $13 Mn WealthTech
2007 $8 Mn RegTech
IPO Listing by FinTechs
(Since 2015)
Name IPO Year
IPO
Funding
Segment
2019 NA WealthTech
2018 $3.9 Mn
Loyalty/
Rewards/
Coupons
2016 $14 Mn WealthTech
2015 NA WealthTech
2018 $20 Mn Lending
2018 $645 Mn B2B FinTech
2017 $387 Mn Lending
2012 NA WealthTech
2013 NA Payments
2015 $11.6 Mn B2B FinTech
Australia’s FinTech narrative has certainly evolved from disruption to collaboration,
leading to high valuations of the operating companies. The past six years were
exciting for venture capitalists as they had Australian FinTech investments in their
portfolio. With the increasing valuation of Australian FinTechs, a wave of FinTech
IPOs has emerged over the past couple of years. 2019 was an interesting year as five
FinTechs went public. In 2020, however, the COVID-19 pandemic led to a decline in
number. We have analyzed 21 FinTechs that have embarked on their IPO journey
over the past six years. Of these, eight belong to the Lending segment and five
belong to the WealthTech segment.
7

CDR and Open Banking
8
Open Banking
The CDR empowers customers to share their financial data with the banks that they choose. Customers can share
their data among providers to easily switch providers, compare products, and explore new products and services.
The CDR was introduced in the banking sector in July 2020, and it will be implemented across other sectors of the
economy, including energy and telecommunications. In Australia, institutions can participate in Open Banking only
if they are accredited by the Australian Competition and Consumer Commission (ACCC). Financial institutions and
companies that participate in Open Banking must compulsorily adhere to strict security standards when accessing
and storing consumer data and are subjected to the Privacy Act. To date, the ACCC has accredited only 12 data
recipients under the CDR.
Impact on Open banking
Currently, the top four banks are mandated to provide account and transaction data; other banks are expected to
follow suit by February 2022. APIs enable authorized banks to share consumer details regarding financial products
such as savings accounts, term deposits, current accounts, cheque accounts, debit card accounts, transaction
accounts, personal basic accounts, GST and tax accounts, credit and charge cards, home loan, personal loan,
mortgage offset accounts, business finance, investment loans, lines of credit, overdrafts, asset finance, cash
management accounts, farm management accounts, pensioner deeming accounts, retirement savings accounts,
trust accounts, foreign currency accounts, and consumer leases.
Digital Identity and Mobile Authentication
The Australian Tax Office (ATO) and Australia Post are the two government organizations currently offering
Identity Service Providers.
• The Australian Taxation Office offers myGovID and permits Australian citizens to create a digital ID that can
securely verify identity across a range of online services. It functions like a mobile app that can be
downloaded from the Apple App Store and Google Play Store. Currently, users can verify two Australian
identity documents, such as a driver’s license and a passport, to unlock online government services.
• Digital ID by Australia Post is a smartphone-based app that allows users to create and validate their ID
against the Australian Government Document Verification Service and then use it as a primary ID system
online and in person. Digital iD was the first industry provider accredited under the Trusted Digital Identity
Framework. Currently, Digital iD can be used to verify an individual for 100+ partner organizations, enter
licensed venues across Australia, and collect parcels at participating Australia Post retail outlets..
Prove is the modern way of proving identity with just a phone number and is used by over 1,000 enterprises and
500 financial institutions worldwide, including 9 of the top 10 US banks. With 1 billion+ consumer and small
business identity tokens under continuous management, Prove’s Phone-Centric Identity™ helps companies
mitigate fraud while accelerating revenue and reducing OPEX across mobiles, desktops, tablets, contact centers,
and in-store channels.
Prove serves as mission-critical infrastructure by leveraging Phone-Centric Identity™ to secure the riskiest aspects
of digital life: banking, commerce, payments, gaming, insurance, and healthcare. Prove’s solutions enable
consumers and small businesses to transact with the trust, speed, ease, and privacy needed to keep the digital
economy humming and growing. Prove’s omnichannel solutions are available in 195 countries.
Visit prove.com to learn more.
About Prove

4,87,221
13,74,527
27,09,280
37,48,737
0
10,00,000
20,00,000
30,00,000
40,00,000
2015-2016 2016-2017 2017-2018 2018-2019
Total number of BNPL accounts
Fiscal Year*
1.28
3.14
5.61
0
5
10
2016-2017 2017-2018 2018-2019
Fiscal Year*
Total value of BNPL transactions (AUD, Bn)
Major Players
Most of the market share in Australia’s BNPL
market is held by homegrown FinTechs: Afterpay
and Zip. Afterpay claims its active customers grew
by 80% in the fiscal half ended December 31,
2020, to 13.1 million from 7.3 million in the year
prior. Last year, Zip reported 2.1 million
customers, a substantial increase from 1.3 million
the year prior. Afterpay launched in the United
States in 2018, and Zip acquired US-based
Quadpay last year to gain a foothold in one of the
world’s biggest markets.
9
The Rise of Buy-Now-Pay-Later
Buy-Now-Pay-Later (BNPL) has captured the attention of the Australian public, unlike any other payment
method. The COVID-19 pandemic has only increased its usage amongst the shopping public. The sector
has given rise to Australian FinTechs such as Afterpay and Zip, which have also expanded to international
markets like the United States. International BNPL players such as Klarna are also active in the Australian
market, with global payment giant PayPal expected to enter soon.
Size and Growth of the Market
Company reports for various ASX-listed BNPL providers indicate that the value of BNPL transactions grew
by around 55% in 2019–2020 and tripled over the previous two financial years. In 2019–2020, these listed
entities processed around $10 billion worth of purchases in Australia and New Zealand. The value of BNPL
transactions has continued to grow strongly through the COVID-19 pandemic as the shift to electronic
payment methods, and online shopping accelerated. Based on recent public disclosures, the value of
transactions processed by some of the large BNPL providers grew by over 50% in the second half of 2020
compared to the same period a year earlier. During the same period last year, numbers from the Reserve
Bank of Australia revealed that the total number of credit cards on issue fell to 16.96 million in December
2020 from 18.78 million in the year prior.
According to data from BigCommerce, Australians used PayPal for 41% of all online transactions in 2021.
Meanwhile, credit cards have accounted for 28% of transactions; debit card use is at 19%. BNPL products
such as Afterpay and Zip have accounted for 13% of online spending so far in 2021.
Data compiled March 3, 2021.
*Australia’s fiscal year runs from July 1 to June 30 of the following year.
Source: Australian Securities and Investments Commission

WealthTech Market Landscape
An Analysis of 127 Startups
ROBO ADVISORS
OTHERS
PFM INVESTMENT
PLATFORMS
FINANCIAL RESEARCH
This is not an exhaustive list.

Payments Market Landscape
BILL PAYMENTS MOBILE DIGITAL WALLET
P2P PAYMENTS
PAYMENT GATEWAYS/
PROCESSORS
POS/ MOBILE POS
OTHERS
InsurTech Market Landscape
CLAIMS POLICY MANAGEMENT/
AGGREGATORS
OTHERS
ONLINE FIRST
INSURANCE
This is not an exhaustive list

B2B FinTech Market Landscape
ACCOUNTING TAX
ACCOUNTS PAYABLE/
RECEIVABLE COLLECTIONS
E-INVOICING
EXPENSE MANAGEMENT/
FINANCIAL SUPPORTING
PAYROLL
OTHERS
Lending Market Landscape
LOAN AGGREGATORS P2P LENDING
OTHERS
SME FINANCING
ONLINE LOANS

Contents
03
Introduction
08
Funding Analysis
• Segment-Wise Funding
• Stage-Wise Funding
• Large Funding Deals
• Active Investors
13
M&A Activity
IPO Listing
Bank/FinTech-FinTech Partnerships
40
Conclusion
21
Segment Analysis
• WealthTech
• Payments
• InsurTech
• B2B FinTech
• Lending
17
Consumer Data Right and
TDIF

About
MEDICI is the world’s leading FinTech Research and Innovation Platform. MEDICI is a partner to
banks, tech companies and FIs globally with over 13,000 FinTechs on the platform, enabling FinTechs
to scale and create global economic impact. MEDICI is committed to supporting the complex
financial services ecosystem and enabling stakeholders benefit from the industry’s accelerated
growth and global impact.
Website: www.goMEDICI.com | Twitter: @gomedici
Global Contacts
Salil Ravindran
Head of Digital Banking & Research
salil@gomedici.com
Aditya Khurjekar
CEO & Founder
ak@goMEDICI.com
Amit Goel
Founder & CSO
amit@goMEDICI.com
Giuseppe Marchese
Head of Business Development, Europe
giuseppe@gomedici.com
Authors
Sulesh Kumar
FinTech Strategy and Research
sulesh@goMEDICI.com
Chandraditya Gudla
FinTech Strategy and Research
gudla@goMEDICI.com
DISCLAIMER
All third party trademarks (including logos and icons) referenced by MEDICI remain the property of their respective
owners. Unless specifically identified as such, MEDICI’s use of third party trademarks does not indicate any
relationship, sponsorship, or endorsement between MEDICI and the owners of these trademarks.
Ravi Rathi
Principal, Research
ravi@goMEDICI.com

Australia FinTech Report 2021 – Executive Summary

Recommended

Recommended

More Related Content

What's hot

What's hot (20)

Similar to Australia FinTech Report 2021 – Executive Summary

Similar to Australia FinTech Report 2021 – Executive Summary (20)

More from MEDICI Inner Circle

More from MEDICI Inner Circle (10)

Recently uploaded

Recently uploaded (20)

Australia FinTech Report 2021 – Executive Summary