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ECONOMY

Global Fintech Investment Declined in The First Half of 2019

Global Fintech Investment Declined in The First Half of 2019

Fintech funding reduced during the first half of 2019, with US$ 37,9 billion of investment globally across 962 deals. 2019 is trending downward at the halfway mark, reflecting a pull-back in mega-deals compared to 2018, according to the KPMG Pulse of Fintech H1’19, a bi-annual report on global fintech investment trends.

Large M&A and buyouts accounted for the biggest deals to date in 2019, including a US$ 6,9 billion buyout of Dun & Bradstreet in the USA, a US$ 6 billion buyout of Concardis in Germany and a US$ 1,3 billion buyout of France-based eFront. Other massive deals will likely close in the near future, including Fidelity’s acquisition of Worldpay (US$ 43 billion), Fiserv’s acquisition of First Data (US$ 22 billion) and the merger of Global Payments with Total System Services (US$ 21,5 billion).

The diversity of jurisdictions attracting significant fintech funding continued to grow, helping to keep fintech investment relatively strong, despite the lack of large deals in any one jurisdiction. Fintech investors across jurisdictions remained focused on a smaller number of large deals, similar to investment trends seen more broadly.

H1’19 Key Highlights

Global fintech investment dropped off last year’s pace - from US$ 120 billion in 2018 to only US$ 37,9 billion mid-way through 2019. This decline might be short-lived, given the massive M&A deals on the horizon.

Corporate-participatory venture investment, which reached US$ 25,3 billion in 2018, fell to US$ 4,75 billion in H1’19, as corporates and their venture arms took a pause from large deal activity.

PE firms maintained the torrid pace of investment set in 2018, reaching over US$ 1,9 billion in H1’19 – propelled by the continued maturation of the fintech sector and resulting investment opportunities in category leaders.

M&A activity took a breather in Q2’19, with less than US$ 4 billion of activity globally versus nearly US$ 20 billion in Q1. This lull is expected to reverse quickly, given recently announced deals by Worldpay, First Data and Total System Services expected to close in H2’19.

There has been a pronounced decline in overall investment into the blockchain and cryptocurrency sectors so far this year, with investment dropping from US$ 5 billion across 586 deals in 2018, to only US$ 1 billion across 171 deals in H1’19. 

Insurtech investment volume dropped over the first half of 2019, from US$ 7,6 billion in 2018 to only US$ 1,1 billion in H1’19.

Following a record year in deal volume and value, overall investment in fintech remained strong in the USA during H1’19, reaching US$ 18,3 billion across 470 deals. M&A activity accounted for 5 of the top deals in the USA and fintech-focused VC investment reached a record level during Q2’19, bolstered by US$ 300 million funding rounds to Carta and Affirm. The USA showed an increasingly diverse number of fintech hubs (including 6 top deals). While payments remained a hot sector for investment in the USA, during H1’19 there was also an increased focus on B2B deals.

European fintech investment across M&A, VC and PE deals remained solid in H1’19, reaching US$ 13,2 billion. Meanwhile, deal volume declined for the 6th consecutive quarter, as European investors wait for later stage rounds and more mature companies. Fintech-focused M&A activity declined from Q1 to Q2’19 – however, the region will likely see another blockbuster quarter once the Worldpay acquisition closes. Europe saw 10 fintech deals over US$ 100 million in value in the first half of the year, led by the US$ 6 billion buyout of Concardis in Germany. The UK remained a strong driver of fintech investment in the region, accounting for 6 of the top 10 deals. Private equity investment in fintech continued to grow, as Europe-based PE investment in fintech reached US$ 1,2 billion in the first half of the year, compared to the record US$ 1,96 billion seen during all of 2018.

Fintech investment in Asia dropped significantly in the first half of 2019 – reaching only US$ 3,6 billion across 102 deals, away from the record level of the investment seen in 2018. The top ten deals within Asia included companies from six different countries: China, Korea, Australia, Indonesia, Vietnam and Singapore. The diversity of these deals highlights the significant growth of fintech hubs in the region.

Hong Kong (S.A.R.) made major strides to support the development of fintech during H1’19, with the Monetary Authority issuing its first eight virtual banking licenses. Those chosen reflect a diverse mix of non-traditional banking organisations, including insurance companies and telecoms. Several of China’s big tech giants were also represented among the companies that obtained virtual banking licenses, including Tencent and Ant Financial.

“The introduction of open banking is emerging as a significant driver of fintech investment, along with the opportunities presented by technologies like ML and AI,” says Ian Pollari, Global Fintech Co-Leader, KPMG International. “We are seeing the growth of sectors like wealthtech and proptech, in addition to increasing participation from the big tech companies looking to leverage the deep customer information they have, in order to expand their reach into financial services.”

“The decline in global investment in fintech hints that some fintech verticals are working better than others; horizontal application of technology such as proptech and the opening up of the banking sector with virtual licenses being ever more popular are expected to attract the biggest investment share”, said Pangratios Vanezis, Board Member and Fintech partner at KPMG in Cyprus.

 

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