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• Fintech investment activity (VC, PE and M&A) in Australia up to US$1.913bn in 2019 from US$753.18 mil in 2019.
• Globally, fintech investment fell from to US$135.7bn in 2019, from a global record of US$141bn in 2018.

The report tracks venture capital, private equity and mergers & acquisitions across global fintech markets and shows that Australia bucked the global investment trend, which saw 2019 fall just shy of 2018’s record with US$135.7bn invested across 2,693 deals.

Notable venture capital deals in Australia included neobank Athena’s US$43.4 mil Series C round, Grow Super’s US$11.8 mil Series B funding round and Cover Genius’ US$10 mil Series C round.

Dan Teper, KPMG Head of Fintech – Australia, commented: “2019 was a break-out year for Australia’s fintech ecosystem, with large-scale M&A activity driving the result alongside significant VC investment in emerging players. There is a depth of innovation across multiple areas of fintechs, including banking and lending, proptech, insurtech and superannuation – and this is increasingly being recognised by investors and corporates.

“As we move forward, we would hope to building on the momentum of 2019, in particular as Australia further develops our digital banking regime and open banking regulations,” he added.

Globally, many niche areas of fintech continued to grow and evolve throughout 2019; in particular, proptech investment grew from USUS$1.9bn in 2018 to a record US$2.6bn in 2019, while fintech-focused cybersecurity investment more than doubled from US$316.9 mil to US$646.2 mil. Blockchain and cryptocurrency investment continued to fluctuate, falling from US$6.3bn to US$4.7bn year-over-year, although Facebook’s announcement of Libra and the People’s Bank of China’s announcement of accelerated research and experimentation on digital currency and electronic payments have helped breathe new life into the space.

• Global fintech investment fell short of 2018’s record year, with US$137.5bn invested in 2019 compared to US$141bn in 2018.
• Global fintech M&A rose from US$91bn in 2019 to a record-high of US$97.3bn in 2019, despite a strong drop in the number of M&A deals from 622 to 426.
• Global corporate VC investment participation rose during every quarter of 2019, leading to US$16.7bn in total annual VC invested with Corporate Venture Capital (CVC) involvement; CVC-related deal volume was also robust, with 553 deals over 2019, including 166 in Q3’19 – the second-highest quarter ever in terms of CVC fintech deals volume after Q2’18.
• Cross-border M&A held strong at US$54.2bn in deal value – despite ongoing global trade tension
• The number of fintech deals by global tech giants – including Alibaba Group, Alphabet, Apple, Baidu, IBM, Microsoft and Tencent – increased for the fifth straight year, with US$3.5bn invested across 46 deals in 2019.
• Cybersecurity related fintech investment more than doubled year-over-year, from US$316.9 mil to US$646.2 mil.
• Proptech investment rose to a record high of US$2.6bn in 2019 from US$1.9bn in 2018.

Fintech investment in the Americas remains strong year-over-year

Fintech investment in the Americas region remained strong in 2019 with US$64.2bn in fintech investment compared to US$65.5bn in 2018. The US set a new record for fintech funding in 2019, with US$59.8bn in investment compared to US$58bn in 2018. The top deals in the US in H2’19 included the US$22bn acquisition of First Data by Fiserv, the US$3.5bn acquisition of Assurance IQ by Prudential, and the US$850 mil acquisition of Axioma by Deutsche Boerse. Corporate investment in the US was very strong in 2019, with corporates investing US$6.9bn in fintech – a significant increase compared to US$5.9bn in 2019.

While the US accounted for a large majority of the fintech investment seen in the Americas, other countries also attracted large deals, including the US$821 mil acquisition of Canada’s Solium by Morgan Stanley (rebranded Shareworks by Morgan Stanley) and the acquisition of Argentina-based Prisma Medios de Pago for US$725 mil. Despite the small decline in annual funding, fintech VC investment in the Americas achieved two consecutive quarterly record highs in Q2’19 (US$5.6bn) and Q3’19 (US$5.9bn). In terms of fintech funding, Brazil saw a very strong increase with US$890 mil invested compared to US$567 mil in 2018.

Europe sees banner year of fintech funding on 2019

Europe set a new record for fintech funding – attracting US$58.1bn in investment compared to US$43.4bn in 2018. The single US$42.5bn acquisition of WorldPay by FIS accounted for more than half of this number. Other large deals in H2’19 included the buyout of eFront in France for US$1.3bn and the buyout of SIA (Milan) in Italy for US$894 mil. In large part due to the WorldPay acquisition, fintech investment in the UK grew substantially – from US$25.4bn in 2018 to US$48.5bn in 2019. Meanwhile, Germany saw a very strong year of fintech investment at US$1.6bn – led by the US$470 mil raise by N26 in Q3’19. France also saw a banner year for fintech with US$1.8bn of total investment.

Asia sees relatively strong funding compared to historical norms

In 2018, Asia saw a massive high of fintech investment, primarily due to the record-breaking US$14bn raise by Ant Financial. When compared to all years prior to 2018, fintech investment in Asia remained relatively steady in 2019 with US$12.9bn invested. The largest deals in Asia during 2019 included the US$1.2bn acquisition of Property Exchange Australia by Commonwealth Bank of Australia in H1’19, and the US$1.7bn Series G raised by India’s Paytm in H2’19. India saw a record-breaking US$3.8bn of fintech funding in 2019, driven by a record Q4’19 (US$2.3bn) which included Paytm’s US$1.7bn raise.

2020: Bigger, bolder deals and blurring lines

In 2020, the lines are going to continue to blur between financial services and non-financial services – with big techs like Alibaba, Tencent, Google and others continuing to look for ways to integrate financial services within their ecosystem of offerings to their customers. Integration will be a big priority and the unbundling of financial services that has occurred over the past few years will likely start to reverse as fintechs, traditional financial institutions, and big techs look to provide more value and more seamless experiences to their customers.

“2020 is going to be an exciting and pivotal year for fintech, particularly as we start to see the impact of the digital banking licensees in Australia, Hong Kong (SAR), and Singapore launching and endeavouring to scale, as well as other markets following suit,” said Ian Pollari, Global Co-Leader of Fintech, KPMG International.

“In addition, a number of companies from outside of financial services are working to get into parts of the financial services value chain – either directly or through partnerships – and they’re going to blur the lines of financial services even more. As a result, we expect to see bolder responses from incumbent financial institutions in terms of partnerships, as well as strategic investments and M&A.”

• Consolidation is going increase, with bigger and bolder M&A deals becoming the norm in more mature fintech sub-sectors.
• The focus on open data opportunities will move beyond banking and into other aspects of the financial services industry.
• The big tech giants like Alphabet, Alibaba and Tencent will increase their focus on the fintech space, both working to increase their reach into developing markets and to increase the value and seamless of their ecosystems to their customers.
• Maturing fintechs and challenger banks will continue to expand the breadth of their service offerings beyond their initial niche focus areas and make strategic moves across international borders.
• The unbundling of financial products will begin to reverse course as consumers increasingly seek a primary interface to manage all of their financial affairs on a holistic level.
• Cybersecurity-focused fintechs will become more attractive as traditional financial institutions shift from building to buying cyber solutions, particularly in areas like fraud, security, and identity management.

Amanda Price, Head of KPMG High Growth Ventures, commented: “Over the past year, the lines have really started to blur between financial services and non-financial services – with fintech companies helping to bridge the gap. In many ways, the main theme for 2019’s Australian fintech market was diversity – with fintech investment expanding across product, sector and geographic borders. Australia punches above its weight when it comes to financial services innovation, and the increasing reach and interconnectivity of our local fintechs is attracting increasing VC attention. It’s a trend that will only continue into 2020.”

*All figures cited are in USD

The Financial Services industry is transforming with the emergence of innovative new products, channels and business models. This wave of change is driven by evolving customer expectations, digitalisation, as well as continued regulatory and cost pressures. We are passionate about supporting clients to successfully navigate this transformation, mitigating the threats and capitalising on the opportunities. KPMG Global Fintech comprises professionals in over 45 fintech hubs around the world, working closely with financial institutions and fintech companies, to help them understand the signals of change, identify the growth opportunities and to develop and execute on their strategic plans.