Global FinTech investment hitting record levels at $98b
By Gaia Lamperti
Global fintech funding across M&A, PE, and VC hit new highs in H1’21, attracting a total of $98 billion in investments, up to $12 billion from $87 billion in the same period the previous year and with a record number of deals.
These are the findings of KPMG’s Pulse of Fintech, a bi-annual report on fintech investment trends. According to the publication, the sector bounced back strongly at the start of 2021 thanks to dry powder cash reserves, increasing diversification in hubs and subsectors, and strong activity globally.
The record number of 2456 deals made in the first six months of the year helped create several private Unicorns (163 created in the first half of the year), made valuations soar (Revolut being a standout example) and fuelled the race to FinTech-hungry SPACs.
“FinTech is an incredibly hot area of investment right now, and that’s not expected to change anytime soon given the increasing number of FinTech hubs attracting investments and growing deal sizes and valuations,” said Anton Ruddenklau, KPMG’s Global Fintech Co-Lead. “As we head into H2’21, we anticipate more consolidation will occur, particularly in mature FinTech areas as FinTechs look to become the dominant market player either regionally or globally.”
The UK was confirmed as the European capital of FinTech, attracting $24.5 billion (£17.7 billion) in investment in the first half of 2021. The London Stock Exchange acquiring data analytics firm Refinitiv for $14.8 billion was a significant confirmation as well as a boost for the UK FinTech sector. The country also registered the highest number of deals ever (283) and second only to the $42.1 billion in the US.
SaltPay and Checkout.com attracted the two largest deals made this year in the UK FinTech sector, with $500 million and $450 million respectively. Payment technology firms followed with significant funding for Rapyd ($300m), PPRO Financial ($180m), DNA Payments ($140m) and PaySend ($125m). Among the “disrupters”, challenger bank Starling Bank ($376m), crypto trading platform Blockchain.com ($300m) and credit-scoring specialist ClearScore ($200m) also secured large investments.
But other regions performed well too. The EMEA saw an overall $39.1 billion in investment, up from $26 billion in the first half of 2020, while Asia hit $7.5 billion, up from $4.5 billion in H1 2020. Wealthtech, regtech, crypto and cybersecurity were among the most appealing sectors to investors.
Corporates have been particularly active in venture deals, partnering with, investing in, or acquiring FinTechs. Global venture capital investment reached over $52 billion for the six months and the largest VC rounds include Robinhood ($3.4 billion), Brazil’s Nubank ($1.5 billion), Swedish BNPL firm Klarna ($1.9 billion), and Germany-based wealthtech Trade Republic ($900 million).
“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,” Ian Pollari, KPMG’s Global Fintech Co-Lead, commented. “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.”
Looking forward to the upcoming months, income-based finance and environmental, social and governance (ESG) solutions are expected to become big FinTech themes, according to the report. Revenue-based financing solutions, banking-as-a-service models, and B2B services are expected to attract the highest levels of investment, while cybersecurity, regulatory frameworks for cryptocurrencies and digital identity will also become important focus areas in H2’21.
Key highlights from the report:
- Global fintech investment reached US$98 billion across 2,456 deals in H1’21 – far outpacing last year’s annual total of $121.5 billion across 3,520 deals.
- M&A deals continued at a very healthy pace, accounting for $40.7 billion across 353 deals in H1’21, compared to $74 billion across 502 deals during all of 2020.
- Late-stage venture valuations more than doubled year-over-year, with global median pre-money valuations for late-stage deals rising from $135 million in 2020 to $325 million at the end of H1’21.
- Corporate participation in VC investment in fintech was incredibly strong in H1’21, with US$20.8 billion of investment globally. Both the Americas (US$13 billion) and EMEA (US$5 billion) saw record levels of CVC-affiliated investment.
- Global investment in cybersecurity reached a new annual record at mid-year—rising from US$2.2 billion in 2020 to over US$3.7 billion in H1’21.
- Cross-border M&A deal value rose dramatically, from $10.3 billion during all of 2020 to $27.7 billion in H1’21 alone.
- PE firms embraced the fintech space in H1’21, contributing $5 billion in investment to fintech— surpassing the previous annual high of $4.7 billion seen in 2018.
- Total fintech investment in the Americas was very robust with over US$51 billion in investment across 1,188 deals.
- The EMEA region saw US$39.1 billion in fintech investment in H1’21, including a record US$15.1 billion in VC funding.
- Fintech investment in the Asia-Pacific region continued at a more moderate pace, reaching $7.5 billion across 467 deals, compared to $13.4 billion across 714 deals during all of 2020.
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