Australia is home to plenty of innovative startups. But the world really started to take notice when Australian software developer Atlassian achieved unicorn status – a moniker earned when the company reaches a valuation of more than $1bn. Since MYOB was crowned as Australia’s first official unicorn back in 2011, the national technology startup sector has shifted from just a few small players to a thriving hub of people and investment, with no signs of slowing down. At the time of writing in 2022, Australia boasts 15 unicorns out of a 1,068 unicorn herd count globally, among them LinkTree, Canva, Pet Circle and Culture Amp. However, Australian fintech unicorns are a rarer species, totalling just 5 out of 309 globally.
Just as unicorns have disrupted their own industries – like how Airbnb radically disrupted the hospitality industry or Uber took on the taxi sector and won – these modern fintech unicorns have been hard at work shaking up the banking and finance sector. As a result, there has been a surge of investments into Australian fintechs and a vast array of innovations. In this blog, we uncover the technologies and key trends underpinning Australian fintech unicorn growth, and explore exactly how they are disrupting the traditional banking sector.
Trend 1. A heightened focus on the customer
Let’s talk about a recent Australian startup that achieved unicorn status, payments provider Zeller. Founded in January 2020 by former Square execs Ben Pfisterer and Dominic Yap, this nimble startup became a fintech unicorn in just under two years. In fact, the most recent data names Zeller the fastest Australian fintech to reach a $1 billion valuation. Their pitch as an all-in-one financial solution for businesses covering payment, savings and spending ensured they quickly won over businesses wishing to circumvent traditional banking’s high fees, poor customer support, outdated EFTPOS hardware and underdeveloped banking technology.
Disruption is a defining characteristic of fintech unicorns. Traditional financial institutions have long reaped the benefits of a captive market and generated immense profits along the way, making the banking sector ripe for disruption. Or as Ben Pfisterer, co-founder and chief executive of Zeller put it: “Australian business banking is fundamentally broken. A lack of innovation from the incumbents means merchants are overlooked and underserved, at a time when they should be thriving. They need new tools, technology, and service to build and grow.”
With Zeller quickly emerging as a far more customer-friendly alternative to the incumbents, they are joining a growing number of fintechs that are already altering the financial landscape of the future.
Trend 2. The platformisation of financial services
Australian payments startup Airwallex is part of the “wave of global unicorns” originating in Australia – this time from a Melbourne café. Founded in 2015, their fintech platform includes an international payments network, global trade finance platform and digital currency asset trading for the financial ecosystem, essentially allowing businesses to manage cross-border payments easily and affordably. CEO Jack Zhang explains, “The company’s purpose is to be connecting the business builders, entrepreneurs, the creators around the world to the borderless opportunities. To help them to grow in their business without borders, and to give them access to these opportunities without the constraint of the traditional financial infrastructure or financial system.”
Another Australian startup ZipCo cracked the unicorn code by developing a product to help consumers ‘buy now, pay later’ using zero-interest point-of-sale loans. Like Airwallex, ZipCo’s growth was certainly buoyed by the pandemic’s role in accelerating demand for cashless payments and online transactions. But its rise can also be attributed to the growth of the platform economy. Both have created seamless, highly scalable digital payment platforms that better meet the needs of global consumers.
Trend 3. Emerging and foundational tech
Fintech unicorns would not be where they are today without technology, be it emerging tech like blockchain and cryptocurrencies or more foundational business management platforms like cloud ERPs.
Blockchain is essentially a decentralised digital ledger of transactions backed by a strong encryption code. This allows secure transactions without the need for a trusted third-party intermediary such as a bank. The blockchain can record information aboutcryptocurrencytransactions and NFTownership, for example. Blockchain is commonly used for cryptocurrencies, such asBitcoinorEthereum. Every time someone buys, exchanges or spends their cryptocurrency, the blockchain records the transaction, so as cryptocurrency has become more mainstream, blockchain has also become more widespread.
While none of the five Australian fintech unicorns use either of these technologies as the foundation for their platforms, they are certainly eyeing up their application. For example, Zhang from Airwallex recently reported that they are building “a crypto product that potentially doesn’t have anything to do with the crypto itself” but which enables crypto trading.
More widespread is the use of cloud ERPs, which provide a modern, agile IT infrastructure that is equipped to scale globally as the business expands. Fintechs usually begin scoping ERP products before series B financing rounds. Cloud-based ERP systems don’t require the heavy CapEx investment that traditional IT systems require and can be quickly and easily scaled up or down in response to demand. And having an integrated ERP and financial system that provides a single, consistent and real-time view of the company’s data enables more accurate and compliant reporting and forecasting.
Meet Australia’s fintech soonicorns
With the synergy of technological shifts, market trends and a growing digital culture, there are plenty more Australian fintech unicorns in the making – or ‘soonicorns’. Keep your eye out for more startups covering digital-only banks, mortgage platforms, lending platforms and investing platforms, many of whom are close to hitting that rare and majestic one-billion-dollar valuation in the coming years!
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