Fintechs face opportunities and challenges in a changing macroeconomic environment

Australia’s fintech sector has come of age, with homegrown fintech continuing to challenge incumbents and disrupt the traditional financial sector, according to the recently released KPMG Australian Fintech First Investigative Report. However, the sector could face headwinds due to talent and funding constraints this year.

During 2021, KPMG Australia surveyed over 70 leading Australian-based fintech companies on a range of topics including revenue, funding, resources and customers.

The report found that while 95% of fintechs surveyed planned to hire talent in Australia this year, only 31% were very or completely satisfied with their ability to recruit in the areas they needed. With only one in five respondents saying they do not plan to raise funds in 2022, the changing capital environment could also impact fintechs.

Daniel Teper, Partner, Mergers & Acquisitions and Head of Fintech (Australia) KPMG Australia, said: “Between 2019 and 2021, we recorded A$10.6 billion of fintech capital investment in the form of venture capital, private equity and mergers and acquisitions activities. As we look to the remainder of 2022, however, we are beginning to see headwinds developing as market dynamics change, and while we believe this presents an opportunity for fintechs to thrive, the ability to raise capital, retaining and hiring key talent, and quickly establishing a sustainable business model will become more critical than ever.

The report shows that technological advancements are enabling nimble and more specialized fintech companies with disruptive data-driven business models to compete in terms of operational efficiency and cost reduction. The data collected shows several key trends emerging from the sector: