Global investors have started to notice. As the pandemic recedes, economies are adjusting through new rates of technology adoption. Companies that typically took years to transition customers to new platforms now do it in weeks. The pace of change has changed — almost overnight.
One major beneficiary is Australia’s fintech industry. Until two years ago, developers from down-under barely figured in global rankings. But in 2021, industry analyst, Findexable, promoted Australian finance technology again. Australian fintech is now rated sixth in the world.
This means Australia’s A$4 billion fintech industry has pulled ahead of every European country, except Switzerland and the UK. The ranking also signals Australia’s leadership in Asia-Pacific. Findexable ranks Australian fintech second only to Singapore in Asia
Australian fintechs are capitalising on their success. Around 44% of Australia’s 700-plus fintechs have raised more than A$100 million in financing. Small commercial lender, Judo Bank raised US$209 million at the height of the pandemic.
Some Australian fintechs have become global players. US-based Block Inc. has offered US$29 billion for Australia’s buy-now, pay-later pioneer Afterpay. And Airwallex — based in Melbourne and Hong Kong — raised US$100 million in November, giving it a US$5.5 billion valuation.
Australia: a nation of early adopters
Australia’s vibrant tech industry sits on solid foundations. In 2018, the UK’s Economist Intelligence Unit ranked Australia first in the world for tech readiness along with Singapore and Sweden. When compared to other countries, Australia stands out as a nation of tech-happy, early adopters.
This benefits Australia’s big four banks. All are now investing heavily in fintech to improve customer services. In fact, nearly 60% of digitally-active Australians use fintech products.
A high-skills workforce also helps. Australian colleges and universities train a local tech workforce to service critical industries. Besides its fintech cohort, Australia is home to roughly 600 edtech companies, 500 medtech companies, and 400 agtech and foodtech companies according to Australia’s 2021 Benchmark report. Approximately 98% of these companies are small or medium-sized.
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And Australia’s fintech talent pool keeps getting bigger. The tech workforce has grown by approximately 65,000 since the start of COVID-19. As borders re-open, expertise will expand. Australia’s talent visas, lifestyle cities and fast-growing demand for skilled people continue to attract technology professionals from around the world.
At the core of Australia’s fintech prowess is a sophisticated A$10 trillion financial sector. This is the nursery for Australia’s extraordinary rise in global fintech. It has in-built advantages. Australia is one of the few countries in the world that has 100% banking penetration. This means millions of citizens checking their funds on advanced banking apps.
These factors all add up to core competitive advantage. Australia’s technology sector is now worth A$167 billion and employs 861,000 people, according to research by Accenture. The sector is highly diverse, with over 35,200 sole traders and 26,100 companies that employ fewer than 20 employees. Fintech is one of its biggest constituents.
A fertile fintech ecosystem — from regtech to insuretech
One key feature of Australian fintech is its very broad base. Today, fintech has spawned multiple subsectors that cater to different finance-related activities.
Regulation technology – or Regtech – thrives in Australia’s pro-innovation regulatory climate. By some estimates, Australia is now the third-largest regtech hub in the world. Canberra-based Castlepoint Systems went global while still a startup, thanks to its world-first, standalone audit and compliance technology.
Australian Insuretech is also taking off. This is partly because Australians have the confidence to complete complex financial transactions via smartphone apps. Embedded insurance startup, Covergenius secured A$100 million in Series C funding in September last year.
Niche skills are also on tap in Australia’s diverse talent pool. Proficiency in BlockChain powers Australian prowess in payments technologies – from consumer-oriented Afterpay, to open access platforms at the Reserve Bank of Australia.
Pro-fintech regulation attracts global investors
A healthy fintech ecosystem has made Australia a magnet for investors. US- and UK-based fintechs see Australia as a natural testbed for global expansion. Recent investors are lured by pro-innovation regulation and organic clinks to huge markets in Asia-Pacific.
British super-app developer, Revolut, made Australia an early first stop in its global expansion. Temporary licensing helped the company set up in Australia. Australian CEO, Matt Baxby, lauds Australia as a venue for piloting new fintech.
“Australia has a familiar regulatory regime and high-quality fintech talent,” he said. “This makes Australia an attractive market for Revolut’s expansion outside of Europe.”
Afterpay talks up Australia as a testbed for fintech development. Marty Gray, Senior Manager for Public Policy, cites a regulatory environment that is oriented towards innovation. This includes sandboxing.
“There is a proactive relationship in Australia between the industry and regulators, and this helped us get our financial product established,” he explained. “It gave us a first-mover advantage.”
Australia also has a fintech bridge with the UK and one in the works with Singapore. These government-to-government agreements reduce barriers for companies to develop and deploy fintech products across markets.
Overseas advisers help startups go global
The Australian Government has been quick to aid fintech expansion. A global network of 68 offices and missions deliver market insights to inquisitive investors. Meanwhile, fintech advisers based in Australia help local startups go global, faster.
The result is that even small Australian fintechs can gain first-mover advantage in global markets. Handii took its online market place for insurance rectification work to the US just three years after launching in Australia. Its journey included mentoring organised by Austrade and introductions to venture capitalists in San Francisco.
“The Austrade team guided us through the VC [venture capital] process,” shared co-founder, Christie Downs. “The mentor helped us refine our pitch, curate a target list of investors and build a forecasting model.”
Overseas investors encounter an advisory network that’s keen to attract fintech pioneers.
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“Introductions made by Austrade helped us to navigate the local regulatory and compliance environments,” said Revolut’s Baxby. “This has been a key enabling factor for us.”
Revolut is just one of a growing number of investors that pay testament to Australia’s ability to nurture fintech pioneers and act as a testing ground for global expansion.
“Australia can also serve as a gateway to markets in the region because of its location and economic ties”, added Baxby. “We believe the resilience and growth shown by fintechs in Australia highlights the maturity of the industry in Australia. This bodes well for the future of fintech in Australia.”
To learn more about how Australia’s best and brightest fintechs can help power your business, please visit Austrade.
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This article is produced by the e27 team, sponsored by Austrade
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