Nearly two-thirds of Australian fintechs have based themselves in Sydney, with the NSW capital driving unprecedented growth in the industry, according to KPMG’s Scaling the Fintech Opportunity report.

According to the report, the number of Australian fintech firms has increased five-fold over the last three years – from 100 companies in 2014 to 579 today.

Despite an overall decline in fintech investment worldwide, the antipodean ‘tiger’ appears to have bucked the global trend, attracting $US675 million ($A850 million) in 2016, a significant gain from the relatively paltry $US53 million achieved in 2012. Sydney alone accounted for $US171 million ($A215 million) in fintech investment between 2014 and 2016.

In a promising boost for the industry, the country’s fintech growth appears to be driven overwhelmingly by local companies, with Australian firms representing nearly 90 per cent of the local fintech industry.

Sydney is posing a genuine challenge to rivals Hong Kong and Singapore as Asia-Pacific’s premier fintech hub, according to the report. A strong underlying financial services industry has provided a critical springboard for the fintech industry’s ascent in Australia, noted Tim Williams, chief executive of the Committee for Sydney.

“Apart from its sheer quantum – Sydney’s financial services sector creates 9 per cent of national GDP and is bigger in scale than the financial services sector in either Hong Kong or Singapore – a key element in its emerging global reputation is the speedy progress we have made in fintech in Sydney,” Williams said.

Commenting on the findings, FinTech Australia chief executive, Danielle Szetho, said the report provides further proof that Sydney is equipped to challenge Singapore’s mantle as Asia-Pacific’s preeminent fintech force.

Szetho also welcomed the growth of Australia’s fintech payments sub-sector, which fatefully coincides with the launch of the New Payments Platform (NPP) – expected to be available by the end of 2017.

“Separately, the finding about Australia’s strength in payments – due to the implementation of the New Payments Platform later this year – illustrates the need to continue to work and deliver outcomes to leverage the NPP as a fintech innovation tool,” she said.

In a survey of industry leaders, the report found that 59 per cent of interviewees identified the fintech sub-sectors of regtech, payments, and blockchain as areas where Australia has the potential become an industry leader.

While payments and digital currency companies dominate the local industry, representing nearly a quarter of all Australian fintechs, regtech and blockchain are still emerging forces in the local market, together making up just over one in ten Australian-based fintechs.

Nevertheless, despite overwhelmingly positive news for the fintech sector, the local industry faces substantial threats from technology giants and disruptive start-ups from abroad, the report said.

The public’s willingness to embrace non-traditional financial services has also grown significantly; more than 80 per cent of surveyed participants said they would consider banking with a technology giant (e.g. Google, Amazon).

“Evolving consumer trends for fintech in Australia show an increasing demand for faster, more convenient and accessible finance and payment services that are embedded into people’s lifestyle and experiences, such as buying a home,” the report noted.

Constant government tinkering is also proving a bane for the local industry. According to the report, regulation is “stifling innovation”, potentially creating an “uneven playing fields for incumbents, start-ups and tech giants alike.

“Sydney, and Australia more broadly, doesn’t yet have a clear business brand for fintech and beyond our quality of lifestyle there is a lack of clear incentive for international talent to come to Sydney to start a business.”

Ian Pollari, Head of Banking Sector, Sydney, KPMG Australia said a key challenge remains for more mature players to scale their businesses, locally and internationally, to remain competitive.

Nevertheless, Pollari is encouraged by the “active nature of many Australian financial institutions in proactively responding to the threats and opportunities of digital disruption, and are doing so through a variety of ‘build, buy and partner’ initiatives”.

The Scaling the Fintech Opportunity: For Sydney and Australia report was co-authored by the Committee for Sydney, an independent think tank for the Sydney region, and KPMG, examining improvements and initiatives that have supported the growth of Sydney’s fintech ecosystem.

The Committee for Sydney has a key role as coordinator of the Financial Services Knowledge Hub, a program to encourage financial services innovation across NSW.

The report surveyed executives from across Australia’s financial services industry, including CBA, Westpac, NAB, IAG and ASX, among others.

Correction: a previous version of this article incorrectly stated the launch date of New Payments Platform (NPP) as 2018. The NPP is expected to be available from November 2017.