A report on Australia's fintech industry by consultancy KPMG says the number of local blockchain companies will decline by 14% in 2024, double the rate of decline for the broader fintech industry. KPMG attributes the decline of blockchain companies to the lingering effects of the 2022 cryptocurrency crash, the AI boom drawing capital away from blockchain, and high inflation creating a difficult financing environment. It is said that The report suggests that 2025 could be a better year for blockchain as a crypto-friendly administration takes office in the US, lowering interest rates and potentially freeing up more capital. suggests.
2024 has not been a great year for Australia's fintech industry, with 7% of all Australian businesses in the sector closing down in the past 12 months, according to a report from consultancy KPMG.
Blockchain companies were the hardest hit industry, with 14% shutting down in 2024. KPMG attributed the decline to the lingering effects of the 2022 crypto crash and the growth of AI pulling some capital out of blockchain.
Despite this decline, KPMG says there is still a variety of solid large players in the industry, including a well-regarded Australian crypto exchange.
The Australian blockchain and crypto sector has several prominent players with a diverse portfolio of products and services, including Independent Reserve, Swyftx and CoinSpot.
KPMG Australian FinTech Outlook 2024 Report
The report also notes that positive signs such as the loosening of the U.S. regulatory environment, the recent launch of spot ETFs, and impending interest rate cuts are likely to boost the blockchain industry next year, suggesting that times are good for the blockchain industry. This suggests that it may be approaching.
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Blockchain will be hit hardest by the prolonged impact of crypto winter
Australia's blockchain sector has lost 12 companies this year, now with a total of 73 companies, down from 85 in 2023, a KPMG report found.
This is the second year in a row that consulting firms have reported a contraction in Australia's fintech industry. The total number of companies in the industry is now 767, down from 800 in 2022.
The shift of capital from blockchain to AI has hit the industry hard after a disastrous year in 2022, but the report suggests that tough times could end in 2025. He states:
While the previous year saw some significant and adverse events for the sector, this year the SEC approval of a Bitcoin ETF could serve as the positive catalyst the blockchain space needs.
KPMG Australian FinTech Outlook 2024 Report
It has been pointed out that an impending interest rate cut could also trigger an economic recovery that could trigger a new wave of capital into blockchain.
Additionally, a series of rate cuts have already begun in many regions and are likely to begin in Australia, potentially freeing up sidelined capital to be pumped back into the sector. Lower risk-free interest rates make alternative investments more attractive.
KPMG Australian FinTech Outlook 2024 Report
Australia's fintech market has become more sustainable, says KPMG
KPMG said in the report that mergers and acquisitions and company closures both contributed to the decline in Australian fintech companies in 2024. The consultancy found that around 3% of Australian fintech companies were acquired in 2024, but in most cases these were smaller and capital-hungry companies. It has been acquired by large foreign “strategic investors,” and venture capital and private equity investment has been further curtailed.
Although there were some acquisitions, KPMG said the bigger driver of the decline was company closures, which affected around 4.5% of Australian fintech companies in the past year. KPMG suggested that the lack of interest rate cuts and persistently high inflation exacerbated an already “complex financing environment” and contributed to these closures.
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Overall, KPMG says the loss of some Australian fintech companies will likely bring the industry to a “more sustainable level given the size of the local market and the current economic headwinds impacting the sector.” ' has been reached.
Australian fintech landscape, source: KPMG
The report says large investors are likely to remain cautious in the short term given global geopolitical uncertainty. However, it also suggests that we may be nearing the end of the current market cycle, with interest rates expected to be lowered in the coming months, reducing the cost of capital and the cost of capital. We are likely to see increased investment across Australia's fintech industry. 2025 could see even more investment in Australian fintech.
