Global fintech funding slowed overall in H1 2020, but sees tailwind from COVID-19-driven digital acceleration
The first half of 2020 brought an overall slowdown in fintech investment around the world, but the venture-capital corner of the space has remained encouragingly robust.
That was one of the topline findings in KPMG’s Pulse of Fintech H1’20 report, which found that during the first six months of 2020, global fintech investment amounted to US$25.6 billion, far behind the total investment of US$150.4 billion that happened in the whole of 2019.
Over the same period, US$20 billion went into VC investment in fintech around the world, setting a pace that, if maintained, would set a new annual record. Nearly half of those flows happened in the Americas, which accounted for US$9.3 billion, while US$6.7 billion and US$4 billion went to Asia and EMEA, respectively. The numbers for the Americas and EMEA, KPMG said, put them on track to break previous records in yearly VC fintech investment.
“Late-stage deals accounted for a significant proportion of VC investment as mature fintechs continued to attract large funding rounds,” KPMG said.
Many of the deals observed in H1’20 stemmed from deal-making processes that began in late 2019; with the onset of COVID-19, new deal activity has slowed dramatically, except in high-priority sectors such as payments. Platform businesses also continued to enjoy strong interest in the first half of 2020, from both investors and large tech firms, especially in markets where fintech isn’t as mature.
M&A activity, meanwhile, decelerated across all regions on the world as the mega M&A activity that marked 2018 and 2019 appeared to stall. Global M&A deals accounted for US$4 billion during the first half of 2020, representing a significant gap from the whole-2019 record of US$85.7 billion.
KPMG predicted that over the second half of the year, COVID-19 will continue to be a key driver of change for fintech investment, as digital trends such as the use of contactless payments and demand for digital-service models persist.
Those forces are expected to continue powering investment not just in direct fintech solutions, but also in related enabling activities such as cybersecurity, fraud prevention, and digital identity management. Notably, global investment in cybersecurity accelerated past the US$592.3 million record set in 2019, amounting to US$870.8 million in the first half of this year alone.
“Over the remainder of 2020, we will likely see investors continuing to focus on late stage deals and safe bets given the current uncertainty,” said Anton Ruddenklau, Global Fintech Co-Leader, KPMG International. “This will likely create challenges for less mature fintechs who could find themselves running out of cash and struggling to raise additional funding.”
