Open banking has been a catalyst for fintech investment in Australia
Fintech investment reached US$600 million in Australia 2018.
Following a drop in 2017 fintech investment levels, KPMG's Pulse of Fintech report has reported Australia's second-highest year on record for fintech investments. In 2018, US$600 million of investments was recorded across 28 deals in sectors such as payments, lending and regtech. But it's Australia's open banking regime which will see the first set of consumer data publicly available to be shared by 1 February 2020, which has contributed to the uptick in investments.
"We have rapidly built a thriving fintech ecosystem and investment plays a critical role," said Ian Pollari, KPMG Australia head of banking and global co-lead for fintech. "Open Banking is another catalyst for further fintech investment, in particular investment in overseas fintech companies which we are already starting to see."
Australia's Consumer Data Right, of which open banking is the first iteration, gives consumers rights over their data and will be used to apply data sharing to other sectors such as energy and telecommunications. This has already started, with the Australian Consumer and Competition Commission (ACCC) publishing the first discussion paper on how to best apply the Consumer Data Right in the energy sector 25 February 2019. KPMG's report notes that while this approach could mean more competition from outside of banking over time, it presents a unique opportunity for banks looking to expand into other areas by using open data.
"In tandem with the development of its open banking regime, Australia has also seen increasing interest from fintech investors in areas that enable open banking, including solutions focused on data sharing, consent management and digital identity verification," the report said.
KPMG notes that Australia gained a significant amount of interest from investors around the open banking and open data regime. Notable investments include Data Republic which raised $22 million in series B funding in Q4 2018. ANZ also recently participated in a Series A funding round from UK open banking platform Bud. The largest transaction of 2018 was the US$245 million acquisition of Avoka.
Globally, fintech investment reached $111.8 billion across 2,196 deals, with $34.2 billion received investment in Europe and $52.5 billion in the US.
KPMG's report said that open banking and open data continued to be key topics among fintech investors.
"It is expected that open banking will lead to more competition as established fintechs work to become more competitive and new fintech companies look to enter the market. Growth, however, will continue to be a key obstacle, with customer acquisition and scaling as particular challenges."