Australia’s mature but fragmented regulatory technology (regtech) sector is ripe for consolidation amid compliance burdens, demand for integrated solutions, and funding pressure, sector experts told Mergermarket.

From 1 July, Australia’s financial intelligence agency and regulator AUSTRAC’s Tranche 2 regulations will introduce new obligations, extending anti-money laundering and counter-terrorism financing (AML/CTF) compliance requirements beyond financial services firms to sectors such as accounting, legal services, and real estate. This increases the number of regulated entities from around 19,000 to more than 90,000, said Hani Iskander, founding partner at M&A advisory firm Cube Capital.

“Separately, Australia’s Scams Prevention Framework Act 2025 is creating a new mandatory anti-scam regime for banks, telecommunications providers and major digital platforms. The first sectors were designated in 2026, with substantive obligations expected to take effect from 31 March 2027. Serious failures can attract penalties of up to AUD 50m (USD 35.6m),” he said.

These regulatory developments are expected to add impetus to consolidation in Australia’s regtech sector, said Ronan Gilhawley, a Sydney-based partner at global consultancy Roland Berger.

Australia is the third largest market behind the US and UK, accounting for some 80 of the 600 global regtechs, and as with all maturing but fragmented sectors, smaller innovators will be absorbed by larger players looking to build scale, said Emma Poposka, co-founder of KYC/KYB and AML compliance platform bronID, who told Mergermarket in May it has had buyer interest but is focused on product development this year to take advantage of new Tranche 2 regulations.

Consolidation is also being driven by demand for integrated compliance solutions as financial institutions look to streamline compliance stacks and reduce operational complexity by building scalable, end-to-end solutions rather than just offering fragmented point offerings, noted Charlie Westerman, CEO of Personr, who told Mergermarket, also in May, it is planning a Series A round later this year.

Funding pressure is also at an all-time high, noted Lisa Shutz, founding director of The RegTech Association and CEO of Australian data-sharing platform Verifier, which has received interest from several global strategics but is not quite ready to pursue exit options.

“Money was easy in 2021 and 2022. It has been scarce since,” Cube Capital’s Iskander said. “Australia has plenty of capable regtechs, but most are small, narrow, and built for a funding market that no longer exists.”

When revenue gets honest

2026 into 2027 is the period to watch, according to Iskander, who believes that although there will be more deals, not all will have happy endings. “That is when the revenue gets honest. When a customer is legally required to buy what you sell, your numbers stop being a forecast and start being a fact. That is the moment a buyer can finally see what is real,” he said.

Lots of discussions will be happening behind the scenes and it will only be the good companies that get the deals, agreed Jill Berry, founder and current CEO of Adatree, which she sold to Fat Zebra in 2024 for an undisclosed sum. It was easy to get money but that’s no longer the case as companies move towards revenue and profit, which is being seen as a form of capital, she said.

Given Tranche 2, AML/KYC is the nearest-term focus area for growth and acquisition, Roland Berger’s Gilhawley said.

Beyond AML/KYC, the narrative is about platform consolidation or identifying niche players with strong export potential, for example, focused on climate disclosure, he said. “This ‘platformisation’ will see a smaller number of broad compliance platforms positioning as infrastructure plays, instead of tools, as they absorb point capabilities.”

Other winning archetypes, according to Gilhawley, include providers of regulatory reporting, advice and conduct compliance, data governance, and onboarding like FrankieOne, which told Mergermarket earlier this month (June) it has seen buyer interest. Also in June, fellow onboarder Sentrient told Mergermarket, it will be ready for a trade sale in around 12 months at a circa AUD 50m valuation.

While banking accounts for about 50% of the regtech market, there is material growth in fintechs, insurance, and payments, Gilhawley added. Players with a diversified end-customer industry and mid-market focus are broadly more attractive than those focused on, for example, the big four banks due to potential concerns around customer concentration risk, he said.

AI is also “quietly resetting the cost of competing,” Cube Capital’s Iskander said.

Broad brush of buyers

Buyers include private equity (PE) for roll-ups, global regulatory-data players for capability, identity and fraud firms for breadth, and accounting and legal software groups to fold compliance into their tools, Iskander said. The missing buyer in the current market is the strategic willing to pay a full premium for a clean, standalone exit, he added.

While many are predicting a clean wave of exits, and while some will be exactly that, a lot will be quieter, Iskander warned. “Founders who raised at 2021 prices, can’t raise again, and are finally returning the call they let ring out two years ago. The ones who prepared early get to choose their moment. The rest are running out of road.”

On the PE and venture capital (VC) front, exit activity has included OIF Ventures’ partial exit from payment protection company Eftsure in 2023 after investing in 2017 and receiving a some AUD 30m return, as announced. Since 2022, OIF has continued to hold stakes in banking compliance company Biza and legal regtech Josef Legal.

PE firm Pemba Capital still holds AI-driven fraud-prevention software company Satori since investing in October 2024 but exited legal regtech Acis to Tasman Capital in March this year for an undisclosed sum.

Five V led a more than AUD 12m Series A round for ESG compliance platform Fair Supply in 2025 and invested in legal regtech Checkbox’s January 2026 USD 23m Series A round. Carthona Capital invested in threat detection company ResponSight in 2016 and climate-focused regtech Pathzero in 2024.

Secondaries will be on the cards, said Marcus Zelter, CEO of automated wage compliance platform Yellow Canary, which counts Airtree Ventures and Parc Capital among its investors and is “ready to consider a sale to the right buyer.”