Investment driven by mega deals: KPMG Pulse of Fintech.
Global fintech funding rose to US$111.8B in 2018, up 120 percent from US$50.8B in 2017, fueled by mega M&A and buyout deals, according to the KPMG Pulse of Fintech report.
Fintech deal volume declined markedly in the second half of 2018, but still reached 2,196 deals for the year, up from 2,165 in 2017. Increasing geographic diversity of fintech VC funding continues to help drive deal volume, even as larger fintech hubs see more concentrated investment in larger deals.
“The growing deal sizes, higher levels of M&A activity and the geographic spread of deals all highlight the increasing maturation of the fintech sector on a global scale,” said Ian Pollari, Global Co-Lead, KPMG Fintech. “Fintech start-ups in markets as diverse as Germany and Brazil are attracting larger and later stage rounds, while the more established fintech leaders in the US, UK, and Asia are making their own investments and acquisitions in order to expand their product and geographic reach.”
In Bahrain, there have been significant initiatives taken to position Bahrain as a regional Fintech Hub. The establishment of the Regulatory Sandbox and the regulatory Framework on Open Banking are game changers which will significantly propel the Fintech ecosystem . According to Jalil AlAali, Partner and Head of Financial Services at KPMG in Bahrain “The Fintech ecosystem in Bahrain has picked up significant momentum in the last year with a sharp focus from the Government to position Bahrain as a key Fintech hub and key advancements in regulations governing Fintechs. The Open Banking regulations especially, could be a game changer.”
2018 Key Highlights
• Mega deals drove a record US$111.8B global fintech investment in 2018, led by three US$10B+ deals, as well as an additional 14 US$1B+ M&A deals. All told, 2018 was a year of multiple record highs across fintech investment, including VC, corporate VC, M&A and PE.
• Fintech investment in the Americas rose from US$29B in 2017 to US$54.5B in 2018. Deals volume also increased from 1,039 deals to 1,245. The US accounted for the bulk of this funding - US$52.5B across 1,061 deals.
• European fintech investment for 2018 increased sharply to US$34.2B from US$12.2B in 2017, thanks to massive M&A and buyout deals, including WorldPay (US$12.8B), Nets (US$5.5B), iZettle (US$2.2B), Fidessa Group (US$2.1B), and IRIS Software Group (US$1.75B).
• The total Asia Pacific fintech investment for 2018 of US$22.7B, up from US$12.5B in 2017, was dominated by Ant Financial’s record-setting US$14B deal in Q2’18, as fintech investment in the region slowed significantly in the second half of the year.
• Cross-border M&A rose significantly in 2018, with approximately US$53.5B invested across borders in 155 deals, up from US$18.9B in 153 cross-border deals in 2017. The US drew US$28B in cross-border M&A, while Europe attracted US$21.6B.
• Investment flowed at a significant pace into key subsectors and technologies – regtech investment surged to US$3.7B in 2018 from US$1.2B in 2017, while investment in blockchain remained strong at US$4.5B in 2018, just off the US$4.8B in 2017.
Fintech investment expected to remain strong in 2019 despite increasing uncertainty
While geopolitical volatility and trade concerns could put a damper on fintech investment in 2019, the strong diversity of global fintech hubs, and the strengthening of subsectors, such as regtech and insurtech, should contribute to continued growth. AI and automation are expected to remain very hot areas of investor interest at the technology level.
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