VC investment in fintech remains robust as M&A activity stalls: KPMG Pulse of Fintech
KPMG Pulse of Fintech
US$25.6 billion in total fintech investment (VC, PE & M&A) in first half of 2020. Global VC investment in fintech accounts for US$20 billion.
While overall global fintech funding fell during the first half of 2020, with US$25.6 billion of investment globally across 1,221 deals, corporate deals are driving continued strength in VC activity, according to the Pulse of Fintech H1’20, a bi-annual report on global fintech investment trends from KPMG International.
A sharp drop in M&A investment drove most of the decline. During H1’20, M&A accounted for just US$4 billion* of fintech investment (compared to $85.7 billion in H2’19), including the $1.3 billion reverse merger of Open Lending. The stalled M&A reflects both a general slowdown in deal activity and investors pressing pause on major deals in order to re-consider valuations and risk appetite given COVID-19.
Despite global uncertainty, VC investment was strong in all regions of the world – and is on track to surpass previous annual record highs should the trend continue. In H1’20, VC investment in fintech accounted for $20 billion, including $9.3 billion in the Americas, $6.7 billion in Asia, and $4 billion in EMEA. Indonesia-based Gojek raised $3 billion in the largest VC deal of the quarter – and the largest fintech deal overall. Gojek competitor Grab accounted for the second largest fintech VC deal ($886 million), followed by Stripe ($850 million). Late-stage deals accounted for a significant proportion of VC investment as mature fintechs continued to attract large funding rounds.
Manav Prakash, Advisory Partner, KPMG in Bahrain, commented “Given the long lead times for deal-making, many H1’20 deals were initiated in late 2019. COVID-19 saw new deal activity slow dramatically, except in high-priority sectors like payments. Despite the pandemic, investor interest in platform businesses remained incredibly strong in H1’20, particularly in less mature fintech markets. Platform business continued to see significant investment from investors and large techs”
2020 Key Highlights
- Global fintech investment is well behind 2019’s total investment of $150.4 billion. At mid-year, total fintech investment globally is $25.6 billion.
- The Americas accounted for the largest share of total fintech investment at mid-year, with $12.9 billion investment. ASPAC saw $8.1 billion in total fintech investment during H1’20, while EMEA saw $4.6 billion in fintech investment.
- The Americas and EMEA are currently on track to see a new record annual high of VC investment in fintech. At the end of H1’20, the Americas had attracted $9.3 billion in VC investment, Asia had attracted $6.7 billion, and EMEA had attracted $4 billion.
- Corporate VC participating investment remained very strong, accounting for $12.2 billion in fintech investment globally. The US saw a record in VC deal value with corporate participation well over $2.4 billion in Q1 2020; the following quarter nearly matched that same amount.
- M&A activity dropped in all regions of the world – a sharp decline due to the mega M&A activity seen during 2018 and 2019. During H1’20, global M&A deals accounted for $4 billion globally, compared to $85.7 billion in H2’19.
- Global investment in cybersecurity flew past 2019’s record high of $592.3 million, reaching $870.8 million.
*All figures referenced are in USD.
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