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Aussie fintechs attract biggest buy-out deals
28 October 2022
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Three of the top five fintech deals in the Asia-Pacific in H1 2022 involved Australian brands, according to KPMG.
Leading the pack in the region and globally was the US$27.9 billion acquisition of Afterpay by US multinational Block.
Wealth and investment management fintech Superhero was the second largest Australian fintech deal - and third in the region - through its US$1.09 billion merger with local crypto exchange Swyftx.
Third largest in Australia - and fourth in the region - was the US$690 million investment in Coda Payments by a trio of venture capital operations.
The strength of the sector in Australia was underlined by an 8 per cent increase in the number of active firms, to 775, KPMG said.
However, sizeable deals and solid results for fintechs could stall due to the increasingly unstable economic conditions, the firm’s head of fintech Dan Teper said.
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“More recently we have seen deal volumes falling and some headwinds develop in the sector, with macro conditions, including inflationary pressures, rising interest rates and increased geopolitical tensions leading to a greater degree of uncertainty around both the global and Australian economic outlook,” said Mr Teper.
“On the back of this, the balance between revenue growth and profitability continues to shift, with investors requiring a greater degree of visibility and often shorter timeframe with respect to fintechs delivering a profitable and self-funded business model.”
“This new focus on profitability is likely to drive a period of more managed growth, as fintechs balance their customer acquisition and top-line growth ambitions against their operating leverage and burn rate, with a number of fintechs already having downsized teams.”
Despite the uncertainty in fintech, KPMG said that the payments group represented almost one-fifth of Australian operations and remained the largest sub-sector.
KPMG expected to see more strategic partnerships or mergers and acquisitions in the sub-sector to create additional operating leverage.
Lending was the second largest fintech sector at 15 per cent and KPMG said consumers and businesses were increasingly looking to alternative means of funding.
However, the long-term viability of these operators could be put under pressure by increasing interest rates, which hit the sustainability of fintech lenders’ business models.
Blockchain and cryptocurrency fintechs were the third most numerous, representing one in nine, but were also the fastest growing, up 18 per cent from 2021.
KPMG said cryptocurrency and blockchain fintechs would only increase in number over the coming years.
“It is expected that we will continue to see new emerging players, innovations and growth also in the coming years, especially as incoming regulation provides heightened levels of validity, compliance and governance over the asset class/technology,” said the firm.
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