Australia recognised for embracing fintech startups
Australia is establishing hubs and improving business conditions for fintechs.
Despite tough market conditions and a global drop in investments, Australia has been praised as a forward-thinking, cultivator of venture-capital (VC) backed fintech startups.
KPMG and CB Insights analysed the global status and outlook of fintech venture funding in their Pulse of Fintech Q2 2016 report and found VC-backed fintech companies raised $2.5 billion through 195 deals, a 12% decline in volume compared with Q1 2016.
However, funding is on pace to exceed 2015 investment levels.
The report says that while some jurisdictions are fighting to advance regulatory changes related to fintech, Australia is establishing hubs and improving conditions for businesses seeking to enter the financial services market.
In June this year, Australian Securities & Investments Commission (ASIC) began consultations to develop a regulatory sandbox - a limited industry-wide licensing exemption to allow start-ups to test certain financial services for six months. The UK has a similar system already in place.
Australia was mentioned on multiple occasions in the report's most notable "rest of the world" VC-backed fintech financing rounds:
- MoneyMe - $30 million venture round in Q1 with undisclosed investors
- SocietyOne - $19 million Series C round in Q2 with investors Australian Capital Equity, Consolidated Press Holdings and News Corp Australia
- PromisePay - $10 million Series A round in Q2 with investors Carsales, Cultivation Capital, Reinventure and Rampersand
- HashChing - $780,000 Seed round in Q2 with investor Sapien Ventures
While Australia has been recognised for its advancement of fintech, certain industries, such as banking and finance, haven't been as heavily disrupted or influenced by digitisation as other sectors.
That's not to say there's no activity brewing. The Commonwealth Bank of Australia recently partnered with financial innovation company R3 and a consortium of global banking institutions to test the efficiency of blockchain technology in transforming trade financing for modern financial markets.
Globally, insurance is an industry ripe for disruption, according to the quarterly fintech report.
Insurers around the world are struggling with a myriad of challenges: low levels of consumer trust, high competition, a low interest rate environment, shrinking profitability and legacy IT issues. Addressing these challenges and creating opportunities for growth can be difficult as any solutions, especially those involving technology, can be complicated, expensive and potentially high risk.
Satisfaction among consumers is a mixed bag when it comes to insurance in Australia.
Customers are appealing for more personalised services and new companies are aiming to provide more targeted insurance solutions in response to these changing demands. Successful funding rounds to a number of these companies has boosted global investor attention on InsurTech, from both traditional venture capital investors and corporate funds.
"Most insurers struggle to leverage existing data to deliver deeper insights," KPMG Australia subject matter expert for InsurTech Martin Blake says in the report.
"Fintech companies that have behavioural analytics and advanced data analytics capabilities can help these insurers gain a deeper understanding of behavioural trends and insights into individuals, allowing for the development and creation of much more customised solutions or fast-tracking customer service."
On a global basis, more than 60% of VC-backed InsurTech deals occurred in the US during Q2 2016. But other countries are etching out their own niches in the InsurTech space.
The reports says Australia is seen as an attractive place to test customer-focused activities. For example, Trov Insurance was founded in the US but first rolled out in Australia.