Global fintech funding rose to USD111.8 billion in 2018, up 120 percent from USD50.8 billion in 2017, fueled by mega M&A and buyout deals, according to the KPMG Pulse of Fintech report.
Deals in the second half of 2018 were topped by Blackstone’s USD17B investment in Refinitiv, the USD3.5 billion acquisition of Blackhawk Network by Silver Lake and P2 Capital Partners, the USD3.4 billion buyout of VeriFone by Francisco Partners, and the USD2.2 billion acquisition of iZettle by PayPal. These deals followed on the USD12.86 billion acquisition of WorldPay by Vantiv in H1’18.
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.”
2018 Key Highlights
“Beyond new fintech-fueled business models, the increasing regulatory and legal obligations emanating from PSD2, GDPR and other regulations are impacting both established players and emerging fintechs,” said Anton Ruddenklau, Global Co-Lead, KPMG Fintech. “As a result, there is increasing interest in technologies – like AI and machine learning – that can be used to help manage compliance requirements more effectively. There’s little doubt that technology investment is going to go up, up, up.”
US sees record fintech investment and deal volume
US fintech investment for 2018 more than doubled to USD52.5 billion, from USD24 billion in 2017, across a record 1,061 deals. While M&A and buyout activity accounted for the majority of this funding, US-based fintech VC funding also rose significantly, from USD7 billion to USD11.4 billion. The USD17 billion Refinitiv deal dominated the USD25.4 billion investment in Q4’18.
Canada and Brazil continue to expand fintech investment
Latin America was a strong target for fintech investors in 2018, with Brazil achieving a record high of USD556 million across 28 deals. Canada saw a record 119 fintech deals in 2018 – bringing in USD1.18 billion of investment.
Europe sees record annual investment despite decline in Q3 and Q4’18
European fintech rose exponentially in 2018 to a record USD34.2 billion raised across 536 deals, compared to USD12.2 billion in 2017. Much of the 2018 funding occurred during the first half of the year, with total investment slumping to USD4.3 billion in Q3’18, and to USD1.3 billion in Q4’18 – an eight-quarter low.
The UK’s USD20.7 billion, up from USD5.6 billion in 2017, accounted for the majority of fintech funding for the region– more than half of which came from the USD12.8 billion WorldPay acquisition in the first half of the year. Q3 and Q4’18 investment dropping significantly, suggesting that fintech investors in the UK may have drawn back due to Brexit uncertainties.
Germany and France experienced a drop-off of fintech investment in 2018. In Germany, USD1 billion was raised across 57 deals, compared to USD1.7 billion across 88 deals in 2017, while France saw USD294 million raised on 34 deals in 2018 versus USD733 million on 50 deals a year earlier.
Asian fintechs attract USD22.7 billion in funding – on strength of Ant Financial deal
Fintech investment in Asia rose from USD12.5 billion in 2017 to a record high USD22.7 billion in 2018, while deals volume dropped marginally from 382 to 372. VC investment was particularly strong in the fintech space in Asia, accounting for USD19.6 billion in investment.
China accounted for the lion’s share of Asia fintech investment, with USD18.2 billion in funding during 2018 across 83 deals, led by Ant Financial’s USD14 billion raise in Q2. India fintech funding declined year-over-year, although still reaching USD1.7 billion across a record 115 deals, while investment and deal volume in Singapore grew for the fourth straight year, accounting for USD347 million across 61 deals. Australia saw USD572 million across 28 deals.
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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