Fintech 2025

AUSTRALIA Trends and Developments Contributed by: Charmian Holmes, Jaime Lumsden, Michele Levine and Jessica Smith, Hamilton Locke

vacy Act 1988 (Cth) (Privacy Act). These reforms introduced: • A proposed cause of action in tort for serious invasions of privacy, which will be the first of its kind in Australia; • Significant new and increased civil penalty provisions (including increased fines and penalties); • Information on automated decision-making to be included in privacy policies; and • Expansion of the scope of what is “personal information” , increasing consumer protection. It is important that fintechs stay abreast of these changes and the application of these changes to them. Maturing Industry With the industry maturing and the regulatory changes ahead, it presents unique investment and transaction opportunities. Some of these are highlighted below. Consolidation There are increasing acquisitive/divestment opportunities in the market that have a focus on service offering expansions or volume/syn - ergy benefits. This is a key indicator of industry consolidation. Businesses with a strong balance sheet are exploring the best ways to deploy capital and this may involve buying and integrating similar or related businesses (including fintechs). Whereas businesses with weaker balance sheets and lim - ited cash runway (typically fintechs) are explor - ing exit opportunities to maximise value given the cost of borrowing and lower equity valua - tions.

It is suspected that, as in other countries, this is the beginning of a wave of consolidation that will follow regulatory reform. Given the proposed regulatory reforms captured above, consolida - tion activity is anticipated to cover payments, BNPL and digital assets over the new few years. Strategic investments Big banks, insurers and other financial institu - tions are continuing to partner and take strategic investments in fintechs, rather than acquiring the fintech outright. This provides both incumbents and fintechs with an opportunity to “try before you buy” and explore the benefits of accessing existing customer bases and distribution chan - nels to provide additional solutions to customers and accelerate growth. As part of these transac - tions, a greater focus is being placed on under - standing the regulatory risks associated when partnering with fintechs, including information and data security and understanding the path - way to regulatory compliance (given the major regulatory reform on the horizon). Secondary trading With venture capital funds looking to realise investments and the lack of IPO activity in these past few years, we expect to see increased sec - ondary trading of securities in scale ups that are “unicorns” or “darlings” . In Australia, we have seen recent examples of large secondary trading activity including Canva in 2024 raising AUD3.5 billion and Employment Hero raising AUD95 mil - lion in 2023 via secondary share sales. Some activity in other sectors involving digital assets is expected over the next 12 months with the IPO runway pipeline starting to build after a quiet spell. The trend is certainly “private is the new public” and ASIC has undertaken a detailed review of the private markets as a result.

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