Overall global fintech funding across M&A, PE, and VC deals soared to a new high in H1 2021, according to KPMG’s Pulse of Fintech, a bi-annual report on fintech investment trends.
Dry powder cash reserves, increasing diversification in hubs and subsectors, and strong activity across the world contributed to the record start to 2021, with funding increasing from USD87.1 billion in H2’20 to USD98 billion in H1’21.
Fintech valuations remained very high in H1’21 as investors continued to see the space as attractive and well-performing – a likely driver in the explosion of unicorn births with 163 created in the first half of the year.
Under pressure to increase the velocity of their digital transformation and to enhance their digital capabilities, corporates were particularly active in venture deals, participating in close to USD21 billion in investment over nearly 600 deals globally, with many realising it’s quicker to do so by partnering with, investing in, or acquiring fintechs.
“Overall investment in fintech surged to a record high in the first half of 2021 as investors, particularly corporates and VC investors, made big bets on market leaders in numerous jurisdictions and across almost all subsectors,” says Ian Pollari, KPMG’s Global Fintech Co-Lead. “Large funding rounds, high valuations and successful exits underscore the thesis that digital engagement of customers that accelerated during the pandemic is here to stay.”
Looking forward to H2’21, total fintech investment is expected to remain very robust in most regions of the world. While the payments space is expected to remain a dominant driver of fintech investment, revenue-based financing solutions, banking-as-a-service models, and B2B services are expected to attract increasing levels of investment. Given the rise in digital transactions, and the subsequent increase in cyberattacks and ransomware, cybersecurity solutions will likely also be high on the radar of investors.
“Fintech is an incredibly hot area of investment right now—and that’s not expected to change anytime soon given the increasing number of fintech hubs attracting investments and growing deal sizes and valuations,” says Anton Ruddenklau, KPMG’s Global Fintech Co-Lead. “As we head into H2 2021, we anticipate more consolidation will occur, particularly in mature fintech areas as fintechs look to become the dominant market player either regionally or globally.”