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High interest rates dampen fintech investment outlook 

Consultancy KPMG predicts fintech investment in Australia will remain soft as high interest rates and economic uncertainties caused by global conflicts continue to weigh on investor appetite.

Fintech deal value plunged 76% to $US587.5 million ($894 million) last year, while the deal count fell by one-third to 95 transactions.

Globally, fintech investment dropped from $US196.6 billion ($299 billion) across 7515 deals in 2022 to a six-year low of $US113.7 billion ($173 billion) across 4547 deals last year.

“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,” KPMG Head of Fintech Dan Teper said.

“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 among investors.”

Artificial intelligence-driven fintechs accounted for $US12.1 billion ($18.4 billion) of global investment last year, down from $US28.1 billion ($42.7 billion) in 2022.

Despite the drop, KPMG says artificial intelligence is a priority for fintech investors.

“The decline in investment does not reflect any lessening of interest in the space. During 2023, many financial institutions and fintechs chose to embrace [artificial intelligence] through alliances and product spend rather than through direct investment.”