- Australian Fintech investment hits US$890 mil in H1’21 – up from US$557.2 mil in H1’20
- US$98 billion in global fintech investment (M&A, PE and VC) in H1’21, compared with US$121.5 billion during all of 2020.
Australia fintech saw a strong start to the year, with US$890 million in fintech investment in H1’21, including National Australia Bank’s US$170 million acquisition of digital bank 86 400 and US$100 million and US$75 million venture capital raises by Airwallex and Brighte respectively.
In addition to open banking, digital banking, payments, and B2B services, Australia saw rising interest in the digital mortgage space with Athena Home Loans raising US$90 million.
Ian Pollari, Global Co-Leader of Fintech and National Banking Leader, KPMG Australia commented: “Against the backdrop of a surge in global fintech investment, there’s been a lot of activity in the fintech sector in Australia so far this year. Corporates continued to be very active, focusing on on addressing capability gaps,enhancing digital offerings and most importantly, improving their customer experience .”
“The emergence of Australia’s fintech sector as globally significant was underlined by the recently announced acquisition of Afterpay by Square in a deal that, if it approved by regulators and proceeds as expected, will rank as one of the largest fintech deals ever recorded.”
Dan Teper, Head of Fintech, KPMG Australia added: “Australia is starting to reap the benefits of early investment in establishing a fintech ecosystem. Interest in banking-as-a-service solutions continued to grow, with the first half of the year seeing Westpac moving forward with its development of a BaaS model in partnership with UK-based fintech 10x, announcing a partnership with regtech FrankieOne to facilitate seamless onboarding.”
“Other major big banks have also focused on investing in ecosystem and vertical players in order to simplify and enhance the experience of consumers, SMEs and merchants. For example, Commonwealth Bank invested $20 million in Amber Energy as part of a partnership to provide access to wholesale energy process to its customers.”
H1’21—Key Global Highlights
- Global fintech investment reached US$98 billion across 2,456 deals in H1’21 – far outpacing last year’s annual total of US$121.5 billion across 3,520 deals.
- M&A deals continued at a very healthy pace, accounting for US$40.7 billion across 353 deals in H1’21, compared to US$74 billion across 502 deals during all of 2020.
- Late-stage venture valuations more than doubled year-over-year, with global median pre-money valuations for late stage deals rising from US$135 million in 2020 to US$325 million at the end of H1’21.
- Corporate participation in VC investment in fintech was incredibly strong in H1’21, with US$20.8 billion of investment globally. Both the Americas (US$13 billion) and EMEA (US$5 billion) saw record levels of CVC-affiliated investment.
- Global investment in cybersecurity reached a new annual record at mid-year – rising from US$2.2 billion in 2020 to over US$3.7 billion in H1’21.
- Cross-border M&A deal value rose dramatically, from US$10.3 billion during all of 2020 to US$27.7 billion in H1’21 alone.
- PE firms embraced the fintech space in H1’21, contributing US$5 billion in investment to fintech – surpassing the previous annual high of US$4.7 billion seen in 2018.
- Total fintech investment in the Americas was very robust with over US$51 billion in investment across 1,188 deals.
- The EMEA region saw US$39.1 billion in fintech investment in H1’21, including a record US$15.1 billion in VC funding.
- Fintech investment in the Asia-Pacific region continued at a more moderate pace, reaching US$7.5 billion across 467 deals, compared to US$13.4 billion across 714 deals during all of 2020.
Overall global fintech funding across M&A, PE, and VC deals soared to a new high in H1’21, 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 US$87.1 billion in H2’20 to US$98 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 US$21 billion in investment over nearly 600 deals globally, with many realising it is 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,” said Ian Pollari. “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.”
Total investment in Asia-Pacific region rebounds in H1’21
Total fintech investment (M&A, VC and PE) and deals activity in the Asia-Pacific region saw a solid rebound in the first half of 2021. After falling to US$4.7 billion across 357 deals in H2’20, H1’21 saw US$7.5 billion in investment across 467 deals – in large part driven by venture capital activity.
India led the way with US$2 billion in total fintech investment, followed by China ($1.3 billion) and Australia ($900 million). The top ten deals in the Asia-Pacific region reflected incredible geographic diversity in H1’21, including South Korea (toss), Indonesia (Gojek), India (Pine Labs, CRED and Razorpay and KreditBee), the Philippines (Mynt), Australia (86400) and China (MediTrust). This diversity highlights the ongoing evolution and maturation of fintech hubs across the region.
Platform players with strong fintech offerings remained very hot in the Asia-Pacific region. Indonesia-based Gojek raised US$300 million in H1’21, while also announcing a merger with payments and eCommerce platform Tokopedia.
Given the explosion of US-based SPACs in recent months, startups – including mature fintechs – in the Asia-Pacific region are expected to see more interest from US-based SPACs over the next six months. During H1’21, Singapore-based super-app company Grab announced the largest SPAC merger ever: a US$40 billion deal with US-based Altimeter Growth Corp, which is expected to be finalised in H2’21.
Strong outlook ahead
Looking forward to H2’21, global 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,” said Dan Teper. “As we head into H2’21, we anticipate more consolidation will occur, particularly in mature fintech areas as fintechs look to become the dominant market player either regionally or globally.”
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