Overall global fintech funding across M&A, PE and VC was $105 billion across 2,861 deals in 2020: the third highest level of investment in fintech ever, said professional services firm KPMG in a new report.
With the exception of M&A – which saw deal value drop over 50 percent (from $130 billion in 2019 to $61 billion in 2020) – the overall fintech market proved remarkably resilient in 2020 despite a broad array of uncertainties, from the global pandemic to the US presidential election, according to the Pulse of Fintech H2'20, the bi-annual report on global fintech investment trends.
Following a short COVID-19 driven pause in H1'20, fintech investment bounced back strongly in H2'20, more than doubling from H1'20 ($33.4 billion) to H2'20 ($71.9 billion). The US was the dominant benefactor for fintech investment in 2020, while the payments space continued to dominate investment from a sector perspective.
Despite global uncertainty, VC investment was strong in all regions of the world. Global fintech-focused VC investment reached $42 billion in 2020, including $20.5 billion in H2. Both the Americas ($23 billion) and EMEA ($9.2 billion) regions saw record highs of annual fintech-focused VC investment. US-based wealthtech Robinhood raised the most VC funding in H2'20: $1.3 billion across two rounds ($600 million and $668 million). Several digital banks also raised funding rounds greater than $500 million, including Sweden-based digital bank Klarna ($650 million), UK-based Revolut ($580 million), and US-based Chime ($533 million).
Manav Prakash, Partner, Advisory services, KPMG in Bahrain, said: “Given the uncertain backdrop, Fintech Investments have been strong globally in H2. Overall, we see the pace of digitalization in the Financial Services Sector gather significant momentum wherein many players are bringing forward their digitalization plans, including in Bahrain. This also includes a serious evaluation of potential Fintech partners who can speed up entry into specific product segments or help reimagine the customer experience. We are also seeing a growing interest from Fintech firms wanting to establish partnerships with other institutions in Bahrain.”
Mahesh Balasubramanian, Partner, Financial Services, KPMG in Bahrain said: “Bahrain offers an excellent ecosystem for Fintech players to establish their regional base and we are witnessing increasing interest from Fintech’s wanting to expand their presence in the region. With the introduction of the Open Banking regulations and use cases, we believe this space will see more innovation and collaboration in the immediate future.”
2020 Key Highlights
• Global fintech investment was $105 billion in 2020 – the third highest year on record despite a significant drop compared to $165 billion in 2019.
• While M&A deal value dropped in the first half of 2020 ($10.9 billion), it rebounded to over $50 billion in H2'20, led by the $22 billion acquisition of TD Ameritrade by Charles Schwab and the $7.1 billion acquisition of Credit Karma by Intuit.
• VC investment in fintech globally rose year-over-year – from $40 billion over 2,834 deals to over $42 billion investment across 2,375 deals. Median VC deal sizes grew significantly for all deal stages between 2019 and 2020, including angel and seed ($1.3 million to $1.7 million), Early Stage ($5 million to $5.8 million), and Late Stage ($10.5 million to $15 million).
• Total fintech investment in the Americas was robust with over $79 billion in investment, including $58 billion in H2'20. The US accounted for $76 billion of this total, including $55 billion in H2'20. EMEA saw $14.4 billion in fintech investment in 2020, including a record $9.25 billion in VC funding. Meanwhile, fintech investment in the Asia-Pacific region dropped to the lowest level since 2014: $11.6 billion.
• Corporate-participated venture investment in fintech was incredibly strong in 2020 at $21 billion, with both the Americas ($9.7 billion) and EMEA ($4.8 billion) seeing record annual levels of CVC investment.
• Global investment in cybersecurity quadrupled – from $500 million in 2019 to over $2 billion in 2020.
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