Following record investments in 2018, Australia's fintech sector saw a subdued investment trend in the first half of this year.
The number of fintech deals and total global investment in fintech dropped in 1H19, a result due primarily to the lack of mega deals like those seen in 2018, according to KPMG's Pulse of Fintech report.
Fintech investments have dropped from $62.8 billion in 1H18 to only $37.9 billion in 1H19 globally, while global fintech M&A hit $23.9 billion in 1H19 compared to $35.6 billion in 1H18.
Despite fewer deals, wealthtech investments hit $2.2 billion globally, surpassing 2018 numbers. PE firms are still active globally, with investments reaching over $1.9 billion across 35 deals this half of the year.
A smaller number of larger deals were the preference for global fintech investors during 1H'19, particularly in more mature markets such as US, Germany, the UK, and fintech verticals. In sectors like payments and lending, investors have a good sense of platforms that will be sustainable, and directed their investments accordingly.
In Europe, fintech investment started strong despite ongoing concerns around Brexit. While overall fintech investment in Europe dropped, VC investment in fintech continue at a level on pace to set a new record annual high if investment levels continue.
In the Asia-Pacific, fintech investments have been muted to $3.6 billion across 102 deals, likely driven by trade tensions between the US and China, along with uncertainty and increased regulatory scrutiny by the government, according to the report.
Still, less mature areas of fintech, including microfinance and consumer finance, are growing rapidly in China, and major strides were made in Hong Kong with the issuance of eight virtual banking licenses.
KPMG said the next 12 to 24 months will be a critical period for many platforms that haven't been able to achieve scale, and consolidation is likely to increase as these platforms look for ways to survive and gain market share.
Facebook's introduction of its cryptocurrency, Libra, revived interest in cryptocurrencies, with a number of global companies buying into it though there are still significant concerns from a regulatory perspective.
Finally, KMPG reports that open banking continues to be a big driver of investment for both incumbent and challenger banks. It is expected to be the catalyst in developing partnerships that allow fintechs to grow, and open opportunities for incumbent banks to enhance their competitiveness in the digital banking era.