Following a global downturn in investment, Australian fintech deal value faced a considerable decline in 2023, dropping by 76% to USD $587 million. The latest Pulse of Fintech, KPMG's bi-annual report, reveals the details of an international slow-down in the fintech market, as 2023's total global fintech investment of USD $113.7 billion recorded a six-year low, compared to the USD $196.6 billion across 7,515 deals in 2022.
Dan Teper, Head of Fintech, KPMG Australia, described 2023 as "a challenging year for the Australian fintech ecosystem," while attributing the significant drop both in total deal value and deal count to a combination of factors. Teper detailed, "The local market, as with the majority of global markets, has been impacted by a number of challenges including, but not limited to, a higher inflation and corresponding higher rates environment, and a change in overall risk appetite amongst investors."
The report highlighted several substantive deals involving Australian fintechs in 2023. Among them was the taxi payment platform A2B acquisition by Singapore-listed transportation firm ComfortDelGro, valued at USD $109.5 million, and an early-stage venture capital raise of USD $50 million by deferred payment loan provider Midkey.
Additionally, robo-adviser Stockspot was acquired by Korean firm Mirae Asset Global Investments, while data analytics software firm Rich Data secured an investment of USD $17.5 million, and SME lender Lumi raised an additional USD $15 million.
Furthermore, KPMG reported a downward trend in investment across major regions in the Americas, EMEA, and the ASPAC region in 2023. The value of global M&A deals dropped to USD $56.4 billion in 2023 from USD $98.2 billion the year before, while global VC investment similarly recorded a decline of about 50%, from USD $88.8 billion to USD $46.3 billion. The global fintech sector most capable of weathering the environment of lowered investment was seemingly payments, retaining the position of the most robust area of global fintech investment in 2023, with USD $20.7 billion, compared to USD $58 billion in 2022.
Interestingly, amidst these challenging market conditions, the fintech industry's interest in Artificial Intelligence (AI) continued to grow in 2023. AI-driven fintech firms drew in investment worth USD $12.1 billion in 2023, thereby underscoring the sector's belief in the potential of AI despite the dip from USD $28.1 billion in 2022. Rather than indicating dwindling interest, the decrease in direct investment is seen as reflecting a shift in approach, with financial institutions and fintechs choosing to embrace AI through alliances and product spending.
Teper predicted, "Looking ahead, we expect fintech growth in Australia to continue to be modest, and with interest rates unlikely to shift materially in the near term, funding and availability of capital are likely to remain a key challenge for local players." This furthermore suggests an ongoing environment of difficulty for the sector going into the first quarter of 2024 due to persistent global conflicts, high-interest rates, and a continued lack of exits. However, Teper also hinted at the potential for investment to gradually pick up as interest rates begin to stabilise and possibly decline.