Fintech is a hot area for investment right now. Broadly defined as technology-driven disruptions in financial services, fintech startups are leveraging more advanced digital technologies and scalable software platforms to deliver faster, more efficient banking products and services than traditional institutions ever have. Or, in many cases, they have created entirely new product categories and business models.

As in the global market, Australia has been attracting a good share of attention from this sector following the creation of a fertile ecosystem that has supported a proliferation of fintech startups, as well as an upwards trajectory that doesn’t appear to be stopping anytime soon. In this blog, we explore the state of the fintech sector right now and what we expect to see in the future of fintech in Australia.

Where is the fintech industry currently at?

Global fintech funding surged 68% to $210 billion year-on-year in 2021. Meanwhile, the fintech industry locally has grown so much that Australia now sits in sixth place in global fintech rankings and second in the Asia Pacific region. This considerable injection of investment into Australian fintechs clearly indicates their critical role in the finance industry and their ability to attract global investment from traditional firms and venture capitalists alike. As a result, more than 800 fintech companies currently operate in Australia, rapidly developing cutting edge technological solutions across eCommerce, the gig economy, marketplace, payment, social media platforms, cloud-based accounting, financial management, productivity and collaboration solutions.

So what’s behind this growth? During the global pandemic, businesses and consumers’ digital behaviours accelerated, and there is growing acceptance that these changes are here to stay. With the rising interest in alternative, digital methods of managing finances, fintechs have a greater opportunity to reshape the financial services industry to drive consumer digital adoption. Of course, there are a number of other factors influencing the future of fintech, including major advances in emerging technology like artificial intelligence, blockchain, cryptocurrencies and much more.

What’s driving fintech innovation in Australia? 

The Australian Trade and Investment Commission pinpointed a number of advantages behind the Australian fintech startup ecosystem:

  • A stable regulatory environment - Regulators have adopted policies, such as a new regulatory class for Stored Value Facilities and a system-wide review that encourages innovation while maintaining market stability. 
  • Asia Pacific region – Close business and cultural ties, and geographic proximity with Asia creates an ideal base for regional operations. 
  • Openness to expand into international markets - Established Australian financial institutions are already forming successful partnerships with foreign and domestic fintechs.
  • A qualified, diverse talent pool - Compared to competitor markets, Australian fintechs have ready access to a workforce with broad skillsets and experience.

What trends are shaping the future of fintech?

1. Blockchain and crypto

There has been an explosion of activity in the blockchain and crypto space and their investor appeal will continue well beyond 2022. Expect to see this technology continue to disrupt the fintech sector as its use cases expand — from cryptocurrencies and trading platforms to NFTs, alternative asset trading and support structures. Not only will we see more startups emerge, but established financial institutions will look to expand their capabilities and offerings, or undertake mergers and acquisitions to bring the innovations in-house.

2. Cybersecurity

Any increase in digital transactions during COVID-19 has already led to a rise in cyberattacks and ransomware, driving home the necessity of having cybersecurity embedded in emerging technologies. Expect to see innovations in fintech in the key areas of threat security, fraud management and passwordless security as companies respond to the increasing risks.

3. Investments, mergers and acquisitions

There is little doubt that the future of fintechs will see increased attention from investors. In 2021, NAB acquired neobank 86 400, Melbourne fintech Airwallex raised A$200 million, cloud-based fintech Athena Home Loans raised $90 million, and customer and renewable-focused credit and sales provider (and Annexa customer) Brighte raised $100 million. Given the success of these companies, we can expect to see a proliferation of local and international investors looking to Australia and the Asia-Pacific region for targets moving forward. Likewise, partnerships between fintech and big tech, platform players and financial institutions will emerge as organisations look to embed fintech solutions in their core services.

Supporting the future of fintech in your fast-growth organisation 

Fintech is asserting its place in modern economies. And as the sector evolves, supported by technologies such as artificial intelligence, blockchain and machine learning, we will continue to see major shifts in financial architectures, service models and consumer behaviours.

But while the fintech sector moves forward with its promise to innovate the way we manage our finances, they must also look under the hood at their own financial and accounting processes. Ensuring the same level of efficiency and innovation in their own businesses requires maturing fintechs to adopt a unified, cloud-based platform for financial management in order to reach their growth goals. This will provide the robust control, global business management capabilities and single source of truth that will allow them to innovate products while empowering insight-driven decisions on partnerships and growth.

The ability to automate processes, expand into new markets, enhance customer relationships and improve visibility all hinge on having a business system that can help you level up your operations. Register for our webinar ‘Cloud ERP for Fintech: Preparing for post-funding growth and scale’ to learn how to leverage modern business systems to grow your fintech company.

On-demand webinar: How tech companies can prepare for growth and scaleAnnexa is a leading NetSuite partner with extensive experience designing and implementing comprehensive and customised business systems, including payroll solutions, financial management, warehouse management and ecommerce solutions.