The Irish fintech industry secured $68.6 million in M&A, venture capital and private equity transactions across ten deals in the second half of 2020, according to the latest KPMG Pulse of Fintech H2’20, a bi-annual report tracking global fintech VC, PE & M&A investment trends.
The investment secured in H2’20 falls below H2 totals in previous years, of $104.8 and $97.9 in 2019 and 2018 respectively. It follows a record start to 2020, where $328.6 million was secured by Irish companies in VC, PE and M&A, dominated by the landmark $162 million acquisition of Irish-founded Prepaid Financial Services by Australia’s EML Payments, which was the largest strategic M&A deal of fintech globally in the first half of 2020.
While investment in the second half of 2020 started slowly, with $4.2 million recorded in Q3’20, it rebounded in Q4 to $64.4 million, with Dublin-based global payroll solutions provider, Immedis, landing $50 million in early stage venture capital investment from Lead Edge Capital, to support its growth in US and APAC markets. The second largest investment was secured by e-commerce financing and marketing analytics start-up, Wayflyer, which raised $10.2m.
Irish fintech companies may have proved particularly attractive in the period in light of Brexit, given the requirement for all UK licensed banks to be licensed in an EU jurisdiction in order to service their EU based clients.
Speaking on investment in Irish fintechs in 2020, Anna Scally, Partner and Fintech Lead at KPMG in Ireland said, “Despite the anticipated dip in H2’20 in light of the pandemic, Ireland remains well positioned to see increased fintech investment post-Brexit from banks and financial institutions choosing Ireland as the base for their European operations. As well as this outside interest, fintechs are shaking up the marketplace domestically with incumbent banks really recognising the force of their competition."
The Irish fintech eco-system is perfectly positioned to provide solutions for institutions which need to adapt quickly.
Scally continues: "We’re seeing banks react to make their lending processes more efficient and we will likely see financial institutions forging more partnerships with early-to-late stage fintechs to accelerate their digital transformation efforts. The Irish fintech eco-system is perfectly positioned to provide solutions for institutions which need to adapt quickly and adopt much more streamlined lending processes. This is imperative in order for them to deliver on their digitisation agendas and remain relevant for their clients, particularly SMEs, many of whom are now in trouble as a result of COVID-19.”
Regulatory Technology, or ‘regtech’, where companies provide a technology-driven service to facilitate and streamline compliance with regulations and reporting as well as fraud protection, will remain an opportunity for Irish companies in the year ahead. Globally during 2020, interest in regtech solutions skyrocketed as companies working to digitise processes quickly to support shifting business and consumer demands looked for efficient and cost-effective ways to manage their regulatory requirements in a shifted business environment. This growing interest drove regtech funding to $10.6 billion, well above the previous high of $6.5 billion seen in 2018.
The ESG (Environmental, Social and Governance) agenda is also expected to become more important component of regulation this year, following signalling from the European Banking Authority (EBA) in November 2020, that the incorporation of ESG factors and risks will eventually be included in the regulatory and supervisory framework for credit institutions and investment firms.
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If you have any queries on Irish fintech investment, or any of the topics in the report above, please contact Anna Scally, Fintech lead at KPMG in Ireland.