6 charts on deals and investments in the global fintech market

02 September 2021 Consultancy.eu 6 min. read

2021 has seen an incredibly strong start to the year for the global fintech market, with very robust investment across venture capital, private equity and corporate investments. A new report by KPMG provides the insights.

Global fintech investment continued its remarkable rebound in the first half of 2021, rising from $87 billion in H2’20 to $98 billion in H1’21. Notably, fintech deal volume hit a new record of 2,456 during H1’21. 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 year’s strong start. 

The Americas accounted for $51.4 billion of fintech investment in H1’21, with the US accounting for the overlarge majority ($42.1 billion.) Investment in the EMEA region was also very robust at $39.1 billion. In the Asia-Pacific region, fintech investment rose considerably between H2’20 and H1’21 – rising from $4.5 billion to $7.5 billion, although investment remained suppressed compared to previous record highs.

Total global investment activity (VC, PE and M&A) in fintech 2018–2021

Private equity

Private equity firms embraced the fintech space in the first half of 2021, contributing $5 billion in investment to fintech – surpassing the previous annual high of $4.7 billion seen in 2018. The largest private equity deals were quite substantial, including the $800 million buyout of InvestCloud by Motive Partners and Clearlake Capital, Silverlake’s $800 million investment in Abu Dhabi-based Group 42 and the $600 million buyout of Ireland-based Fenergo by Astorg and Bridgepoint. 

Global PE growth activity in fintech

Venture capital

Global venture capital investment reached over $52 billion in H1’21 – very close to the annual record of $54 billion seen in 2018. The largest venture capital rounds of the half year included US-based Wealthtech Robinhood ($3.4 billion), Brazil-based digital Nubank ($1.5 billion), Swedenbased ‘buy now, pay later’ firm Klarna (two rounds totaling $1.9 billion), and Germany-based wealthtech Trade Republic ($900 million).

South Korea-based mobile financial app Toss raised $410 million in Asia’s largest venture capital round of H1’21. 

Global venture activity in fintech 2018–2021

Corporate investments

There was $21 billion in corporate-affiliated venture capital investment in H1’21. Total deal volume reached a high of 284 in Q1’21 and then grew further to 312 in Q2’21. Corporates around the world are under pressure to increase the velocity of their digital transformation activities and to enhance their digital capabilities. Over the last year, many have seen that it’s quicker to do so by partnering with, investing in or acquiring fintechs, particularly with respect to high demand skills.

Global VC activity in fintech with corporate participation 2018–2021

Commenting on the performance, Ian Pollari, KPMG’s Global Fintech Co-Leader and a partner at KPMG Australia, said: “Global investment in fintech has seen a quick V-shaped recovery from 2020 levels. Growing deal sizes, valuations and successful exits for proven players and proven thematics have driven this result. Corporates are also increasingly looking to seize new market opportunities or urgently address gaps by embracing partnering and M&A to achieve their strategic objectives.”

Hot trends

KPMG’s bi-annual ‘Pulse of Fintech’ also looks into the top fintech investment and deal trends for the coming months:

Crypto and blockchain
Crypto will be a hot focus for investors according to KPMG, following an explosion of activity in the blockchain and crypto space. “There’s so much happening in the space right now, between the eCNY project running in China, Facebook’s Diem, a number of ecosystem initiatives — not to mention all the different trading platforms raising money. Digital currencies and virtual assets are a big, big topic of conversation,” said Anton Ruddenklau Global Fintech Co-Leader and a partner at KPMG in Singapore.

Total global investment activity (VC, PE and M&A)  in blockchain & cryptocurrency 2018–2021

“We’ll likely see this trend continue, with focus stretching across the crypto ecosystem – from cryptocurrencies and trading platforms to NFTs, alternative asset trading, and support structures. The space will also see a more diverse range of investors considering investments in the space,” 

Cybersecurity
Cybersecurity will likely gain even greater prominence, according to the report. Given the rise in digital transactions and the subsequent rise in cyberattacks and ransomware, cybersecurity is a focus area for investors, particularly corporates. In addition to threat security, fraud management, KYC, and passwordless security will gain increasing attention from investors.

Total global investment activity (VC, PE and M&A) in fintech: cybersecurity

B2B services
The report predicts that B2B services will gain attention across fintech subsectors. “We’ll likely see B2B services such as banking-as-a-service, gain even more ground on the investor radar – not only in the payments space, but also in areas like insurtech, wealthtech, and regtech. We expect to see embedded finance continue to gain traction as organizations strive to integrate financial services with other environments,” write the experts.

Partnerships
Partnership models will be a critical means for companies looking to expand their service offerings. We’ll likely see partnerships emerging across the fintech sector – from wealthtech to insurtech – and involving a range of participants from the big techs and platform players to financial institutions and larger fintechs looking to add to their core services,” reads the report.