Global fintech investment surges

  • By Christine St Anne

Global investment in fintech including in Australia more than doubled in 2018 with the vast majority of funds in Australia being invested into lending start-ups.

According to a global report by Accenture, last year fintech start-ups in Australia raised $756.7 million, more than double the $322.3 million raised in 2017.

This was driven by $350 million in a line of credit round to Judo Capital.

Investment in Australian lending start ups accounted for 68 per cent of the fintech financing in Australia. Fintechs in payments accounted for 17 per cent.

Accenture report revealed that there was a total of 51 deals in Australia in 2018.

“With the Australian banking industry experiencing challenging times, suffering from diminished trust and against a demand for greater customer experiences, there’s a significant opportunity for financial technology firms, as recognised by this analysis, to partner with, as well as compete with, traditional financial firms,” Accenture Australia banking lead Alex Trott said.

“As the introduction of open banking fast approaches and with new banking licenses in the pipeline, further investment in Australian fintechs is likely to accelerate as the start-ups look to take advantage of their leaner and more agile structures to gain new market share in transactions, retail banking and lending,” he said.

Trott also sees an opportunity for an opportunity for fintech innovations in the wake of the Royal Commission, with “various local fintech players working to improve remediation and compliance through artificial intelligence and other emerging technologies.”

Indeed it was a theme highlighted at the recent RegTech Association’s annual conference.

AI is the focus for Westpac’s innovation team. Regulators are also looking at similar innovations to help them with their supervisory focus with Austrac and ASIC even taking an active approach to partnerships in the sector.

While investment in fintechs remains strong in Australia, the numbers paled in comparison to other countries. Global investment in 2018 stood at US$55.3 billion – more than double in 2017.

Not surprisingly China led the surge with a nine-fold increase in the value of deals in China to US$25.5 billion.

China accounted for 46 percent of all fintech investments in 2018.

A record year

More than half of China’s fintech investment came from the record US$14 billion funding round in May of Ant Financial.

The single Ant Financial fundraising, which Accenture categorised under wealth and asset management, makes up the vast majority of all funding for that category, catapulting investment into wealth and asset management start-ups to lead position, with 30 percent of total investments globally. Payment start-ups accounted for 23 percent of the fintech financing, and those in lending accounted for 19 percent.

After Ant Financial, the next-largest fundraiser was China’s Du Xiaoman Financial — spun off from Chinese search engine giant Baidu in April — which raised US$4.3 billion in two separate transactions to bolster its consumer finance business and strengthen cooperation with domestic lenders.

Another large transaction in China included the US$1.3 billion that wealth management platform Lufax raised in December after postponing plans for a Hong Kong IPO.

“Even if you discount the massive Ant Financial transaction, we’d still have a record year for global fintech fundraising, with strong activity in many corners of the world, so these are broad-based gains,” Accenture managing director Piyush Singh who also leads the firm’s financial services practice in Asia Pacific.

Despite concerns around Brexit, in the UK fintech investment jumped more than 50 percent, to US$3.9 billion.

Challenger banks were among the biggest beneficiaries of UK fintech financing, underscoring investors’ outlook for the sector just as the launch of open banking regulations in the country made it easier for consumers to share their financial data with third-party providers.

Atom Bank received nearly US$200 million in March, Revolut raised US$250 million in April, and Monzo raised about US$110 million in October.

In addition, Prodigy Finance, which provides cross-border loans to postgraduate students, raised US$1 billion from a group of banks and other investors.