What an incredible start to the year for the fintech market globally. As you’ll see from this edition of Pulse of Fintech, the rebound we saw in H2’20 continued into H1’21, with very robust investment across VC, PE, and venture capital. We saw growing deal sizes in a wide variety of fintech subsectors — from wealthtech and regtech to crypto and cybersecurity. If there was a word that could be used to describe H1’21, it would be: diversity.
Global fintech investment continued its remarkable rebound in H1’21, rising from $87 billion in H2’20 to $98 billion in H1’21. Fintech deal volume hit a new record of 2,456 during H1’21. A wealth of dry powder, an increasingly diverse range of fintech hubs and fintech subsectors, and robust activity in almost all regions of the world contributed to the strong start to 2021.
Global investment in fintech has seen a quick V-shaped recovery from 2020 levels. Growing deal sizes, valuations and successful exits for proven players and proven thematics have driven this result. Corporates are also increasingly looking to seize new market opportunities or urgently address gaps by embracing partnering and M&A to achieve their strategic objectives.
Global VC investment reached over $52 billion in H1’21 — very close to the annual record of $54 billion seen in 2018. The largest VC rounds of H1’21 included US-based Wealthtech Robinhood ($3.4 billion), Brazil-based digital Nubank ($1.5 billion), Sweden-based ‘buy now, pay later’ firm Klarna (two rounds totalling $1.9 billion), and Germany-based wealthtech Trade Republic ($900 million). South Korea-based mobile financial app Toss raised $410 million in Asia’s largest VC round of H1’21.
There was $21 billion in corporate-affiliated VC investment in H1’21. CVC deal volume reached a high of 284 in Q1’21, and then grew further to 312 in Q2’21. Corporates around the world are under pressure to increase the velocity of their digital transformation activities and to enhance their digital capabilities. Over the last year, many have seen that it’s quicker to do so by partnering with, investing in, or acquiring fintechs, particularly with respect to high demand skills.
The Americas accounted for $51.4 billion of fintech investment in H1’21, with the US accounting for $42.1 billion. Investment in the EMEA region was also very robust at $39.1 billion. In the Asia-Pacific region, fintech investment rose considerably between H2’20 and H1’21 — rising from $4.5 billion to $7.5 billion, although investment remained suppressed compared to previous record highs.
Cryptocurrency and blockchain is exploding globally. There’s so much happening in the space right now, between the eCNY project running in China, Facebook’s Diem, a number of ecosystem initiatives — not to mention all the different trading platforms raising money. Digital currencies and virtual assets are a big, big topic of conversation. I think for the rest of this year at least, crypto will be a very hot ticket for investors.
PE firms embraced the fintech space in H1’21, contributing $5 billion in investment to fintech — surpassing the previous annual high of $4.7 billion seen in 2018. The largest PE deals were quite substantial, including the $800 million buyout of InvestCloud by Motive Partners and Clearlake Capital, Silverlake’s $800 million investment in Abu Dhabi-based Group 42, and the $600 million buyout of Ireland-based Fenergo by Astorg and Bridgepoint.
Cross-border M&A deal value rose dramatically — from $10.3 billion in all of 2020 to $27.7 billion in H1’21 alone. Following a pandemic-driven slowdown in cross-border M&A, many incumbents and mature fintechs embraced cross-border M&A as a means to gain critical mass at a regional or global level or to expand services and capabilities.
Large fintechs and platform companies have focused on building up their platform or ‘super app’ models, including embracing solutions like embedded finance in order to provide a stronger ecosystem of services. This is particularly true in Southeast Asia; in H1’21, Gojek announced a merger with marketplace Tokopedia —in part to better compete with super apps such as Grab1 and mitigate any competitive threat from SEA Limited.
Big techs have continued to move into the banking space to create an extended experience for their customers or to remove friction points in processes — primarily by forging partnerships with existing banks. Most recently, Google announced partnerships with a number of banks and credit unions — including Citi, BBVA, Bank of Montreal, Stanford FCU and others — to provide Google Plex digital bank accounts integrated with Google Pay.
VC investments surge and cross-border M&A more than doubles all of 2020.
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