2019 Another Blockbuster Year for Fintech: KPMG Pulse of Fintech
Global fintech investment in 2019 fell just shy of 2018’s record with $135.7 billion invested across 2,693 deals, according to the Pulse of Fintech H2’2019, a bi-annual report on global and regional fintech investment trends published by KPMG.
The main theme for 2019’s global fintech market was diversity – with fintechs and fintech investment expanding across product, sector and geographic borders. The expanding definition of fintech and its increasing reach and interconnectivity helped keep fintech investment robust despite the global economic and trade challenges that hindered growth in 2019, including concerns related to Brexit and ongoing trade tensions between China and the US.
In fact, despite these concerns, cross-border transactions remained high with $54.2 billion in cross-border M&A deal value across 138 deals. This focus on cross-border transactions will likely continue as maturing fintechs look to grow and achieve scale and the big tech giants look to extend their reach and gain market share in less developed markets.
Many niche areas of fintech continued to grow and evolve throughout 2019; in particular, proptech investment grew from $1.9 billion in 2018 to a record $2.6 billion in 2019, while fintech-focused cybersecurity investment more than doubled from $316.9 million to $646.2 million. Blockchain and cryptocurrency investment continued to fluctuate, falling from $6.3 billion to $4.7 billion year-over-year, although Facebook’s announcement of Libra and the People’s Bank of China’s announcement of accelerated research and experimentation on digital currency and electronic payments have helped breathe new life into the space.
2019 Key Global Highlights
- Global fintech investment fell just short of 2018’s record year, with $137.5 billion invested in 2019 compared to $141 billion in 2018.
- Global corporate VC investment participation rose during every quarter of 2019, leading to $16.7 billion in total annual VC invested with CVC involvement; CVC-related deal volume was also robust, with 553 deals over 2019, including 166 in Q3’19 – the second-highest quarter ever in terms of CVC fintech deals volume after Q2’18.
- The number of fintech deals by global tech giants – including Alibaba Group, Alphabet, Apple, Baidu, IBM, Microsoft and Tencent – increased for the fifth straight year, with $3.5 billion invested across 46 deals in 2019.
- Cybersecurity related fintech investment more than doubled year-over-year, from $316.9 million to $646.2 million.
- Proptech investment rose to a record high of $2.6 billion in 2019 from $1.9 billion in 2018.
According to Manav Prakash Advisory Partner at KPMG in Bahrain “In 2020, the lines are going to continue to blur between financial services and non-financial services – with big techs like Alibaba, Tencent, Google and others continuing to look for ways to integrate financial services within their ecosystem of offerings to their customers. Integration will be a big priority and the unbundling of financial services that has occurred over the past few years will likely start to reverse as fintechs, traditional financial institutions, and big techs look to provide more value and more seamless experiences to their customers”
Key Predictions for 2020
- The big tech giants like Alphabet, Alibaba and Tencent will increase their focus on the fintech space, both working to increase their reach into developing markets and to increase the value of their ecosystems to their customers.
- Maturing fintechs and challenger banks will continue to expand the breadth of their service offerings beyond their initial niche focus areas and make strategic moves across international borders.
- The unbundling of financial products will begin to reverse course as consumers increasingly seek a primary interface to manage all of their financial affairs on a holistic level.
- Cybersecurity-focused fintechs will become more attractive as traditional financial institutions shift from building to buying cyber solutions, particularly in areas like fraud, security, and identity management.
- Consolidation is going to increase, with bigger and bolder M&A deals becoming the norm in more mature fintech sub-sectors.
- Building on the momentum of Hong Kong (SAR) and Australia, more countries in the Asia Pacific region will develop digital banking regimes and use digital banking licenses to guide digital bank efforts.
- The focus on open data opportunities will move beyond banking and into other aspects of the financial services industry.
Anthony Harris, Head of Digital and Innovation at KPMG in Bahrain notes that “Regulators are increasingly allowing new Fintech entrants into their financial sectors in order to accelerate industry transformation. And as the Fintech-driven unbundling of incumbent financial institutions’ product portfolios hits a peak, the race is now on to re-bundle services and experiences around customer-centric, data-driven platforms. Competition is coming from Neo Banks, Fintechs as they look to scale, and Technology Platform Challengers such as Amazon, WeChat, Alibaba. Firms that effectively orchestrate platform or ecosystem environments typically end up as the winners.”
*All figures cited are in USD
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