Global FinTech investment more than doubled to $112 billion

21 February 2019 Consultancy.eu

Investments in FinTech’s have reached a new record last year. A whopping $112 billion was pumped into innovative companies that pursue technological innovation in the financial sector, a sharp increase compared to the $51 billion in the previous year.

The stellar growth globally is in large part the result of three mega deals of more than $ 10 billion: the $17 billion investment by Blackstone in Refinitiv, the $13 billion acquisition of UK’s WorldPay by Vantiv, and the $14 billion capital funding raised by Chinese firm Ant Financial. The data stems from KPMG’s latest report on the FinTech investment landscape, which looks at investments of all sizes and across all stages, from venture capital and seed funding rounds to private equity and mergers & acquisitions. 

Funds raised by FinTech companies in Europe also reached a historic peak –$37.5 billion, up from $12.2 billion the year previous. With an increase from $5.6 billion in 2017 to $24.1 billion in 2018, the UK accounted for the majority of European FinTech investments, with WorldPay being the icing on the cake. Contrary to the UK, powerhouses Germany and France saw investments in their FinTech’s drop substantially last year. In Germany, $1 billion was raised across 57 deals in 2018, compared to $1.7 billion across 88 transactions in 2017. France last year enjoyed 34 deals for an amount of $294 million. In 2017, this was 50 deals with a value of $733 million.

Total investment activity in FinTechOne evident trend from the data is that large companies are ramping up their investments in FinTech firms. This can according to the authors be explained by the growing need of financial services institutions to ramp up their cost effectiveness, service portfolios and customer experience. The role of technology and innovation plays a key role in realising such advancements, and smaller, agiler companies are better able to blend the two into a proposition that adds value. The number of FinTech’s which received a participation from corporates (‘corporate venturing’) grew to 357, with total deal value at $23.1 billion, nearly $13 billion higher than the year previous.

M&A was however the key driver of growth, with in particular the number of international deals seeing a bump in activity, jumping from around $19 billion to nearly $54 billion. “This shows that FinTech has evolved,” highlighted the researchers, adding “more players in the financial services landscape are seeking to expand their geographic reach. 2018’s clear peak in volume – and massive surge in deal value – reflects the of the M&A cycle within financial services and FinTech, as acquirers are willing to pay up in order to consolidate a more commanding position within their focus areas. 

From a functional perspective, the payments and lending domains continued to attract the most significant investment globally. RegTech saw a large boost – in the past twelve months, spending on new technologies that enable more efficient compliance to regulation tripled from $1.2 billion in 2017 to $3.7 billion in 2018. “This type of investment is mainly driven by the continuous growth of new laws and regulations that companies must comply with,” explained Paul Koetsier, a regulatory compliance expert at KPMG. Koetsier: “PSD2, similar open banking regulations in the UK and the new privacy laws have generated a growing interest in RegTech and other emerging technologies. European companies and foreign companies that do business in Europe are constantly looking for opportunities to deal more effectively with the requirements that new regulations entail.”

Global M&A activity in FinTechOutlook

According to the experts at KPMG, the outlook for FinTech investments remains bright in 2019, however, the risk ofgeopolitical volatility and trade issues could jeopardise some of the growth in deal value and volume. Globally, there is likely to be an increase in investment focused on solutions targeted to the needs of unbanked and underbanked people in the developing world, including southeast Asia and Africa.

Payments is expected to be a key growth area, on the back of the PSD2 regulation that has rolled out in most European countries. This new law stipulates that new entrants to the payments market, such as specialised FinTech firms or large technology companies that obtain a license from the local authorities, should be granted access to the payment records of consumers, provided the account holder gives permission. The idea behind PSD2 is that competition for products around financial insight and management will increase, which down the line is expected to benefit the consumer. 

Across the FinTech landscape, incumbent players such as established banks and insurers will increasingly face tech giants such as Google, Alibaba en Microsoft in the M&A space, as they seek to leverage FinTech’s to ramp up their capabilities in financial services. 

Related: Capgemini and Efma launch content and matchmaking platform for FinTechs.


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