Globally fintech investment hit $98bn in the first half of 2021, compared with $121.5bn during the entirety of a Covid-19-hit 2020, new research from the consultancy KPMG showed.
The figures include venture capital and private equity (PE) investment, as well as mergers and acquisitions (M&As). PE firms contributed $5 billion in investment to fintech, while cross-border M&A deal value rose dramatically — from $10.3 billion in all of 2020 to $27.7 billion in H1’21 alone.
“A wealth of dry powder, COVID-related digital acceleration, an increasingly diverse range of fintech hubs and subsectors, and robust activity in almost all regions of the world contributed to the strong start to 2021” the report ‘Pulse of Fintech H1’21’ said.
“Global VC investment reached over $52bn in H1 2021 — very close to the annual record of $54bn seen in 2018. The largest VC rounds of H1 2021 included US-based Wealthtech Robinhood ($3.4bn), Brazil-based digital Nubank ($1.5bn), Sweden-based ‘buy now, pay later’ firm Klarna (two rounds totaling $1.9bn), and Germany-based wealthtech Trade Republic ($900m). South Korea-based mobile financial app Toss raised $410m in Asia’s largest VC round of H1 2021.”
Commenting on the findings, Ian Pollari, KPMG’s global fintech co-lead, stated:
“Overall investment in fintech surged to a record high in the first half of 2021 as investors, particularly corporates and VC investors, made big bets on market leaders in numerous jurisdictions and across almost all subsectors. Large funding rounds, high valuations and successful exits underscore the thesis that digital engagement of customers that accelerated during the pandemic is here to stay.”
Americas accounted for $51.4bn of fintech investment in H1, with the US continuing to lead accounting for $42.1 billion. The Europe, Middle East and Africa (EMEA) region saw $39.1 billion in investment, up from $26 billion in the first half of 2020.In Europe, the UK attracted $26bn, followed by the Nordic region with $4.8bn invested, Germany with investment of $2.5bn and France with $2bn invested. In Africa, most of the funding was received by Nigeria, Kenya, South Africa and Ghana.
(Source: KPMG Pulse of Fintech H1’21)
Asia saw $7.5 billion - up from its low performing $4.5 billion in H1 2020. India, China and Australia led the way for major fintech investment in the region.
Among the top funded sectors so far this year are wealthtech, regtech, crypto and cybersecurity.
Looking toward the next six months, “total fintech investment is expected to remain very robust in most regions of the world. While the payments space is expected to remain a dominant driver of fintech investment, revenue-based financing solutions, banking-as-a-service models, and B2B services are expected to attract increasing levels of investment,” the report said, adding cybersecurity will
gain even greater prominence.
M&A activity will likely grow considerably as corporates look to expand their capabilities and offerings and fintechs look to scale. Cross-border activity will likely also be robust as fintechs look to become global or regional leaders. This could also drive the return of major mega M&A transactions.