• $328.6 million recorded in transactions and investment in Irish fintech companies in the first half of 2020
• Mega-deals secured by Irish founded Prepaid Financial Services, Payzone and Fenergo
• Ireland gains attractiveness in wake of Brexit

Ireland’s fintech industry saw a record period of activity in the first half of 2020, with $328.6 million* recorded in M&A, venture capital and private equity transactions across eight deals, according to the latest KPMG Pulse of Fintech H1’20, a bi-annual report tracking global fintech VC, PE & M&A investment trends.

While the volume of deals declined from the same period last year, where 14 were recorded, the value has increased substantially, with $328.6 million recorded so far this year - more than double the total for all of 2019, where $155.6 million was recorded across 26 deals.

The standout $162 million acquisition** of Irish-founded Prepaid Financial Services by Australia’s EML Payments was the largest strategic M&A deal of fintech globally for the period. The deal had been announced in November 2019 but was renegotiated against the background of the global coronavirus pandemic and closed in March 2020.

Meanwhile globally, fintech funding fell during the first half of 2020, with $25.6 billion in total fintech invested across 1,221 deals. A sharp drop in M&A investment drove most of the decline globally, with  M&A accounting for just $4 billion of fintech investment, compared to $85.7 billion in H2’19.

Other notable deals in Ireland over the period include the $83.4 million joint venture acquisition of Payzone Ireland by AIB and First Data and a $80 million funding round by client lifecycle management company, Fenergo. Limerick-based CloudCards, developers of a cloud-based aircraft asset management software platform raised $2.2 million in venture funding; Dublin-based Supply Finance, a provider of trade financing software for SMEs, raised $1.96 million in venture funding; and Dublin-based Circit, financial audit management platform developers, raised $1.24 million in venture funding. There were also a further four investments in Irish Fintechs in H1’20 the amounts of which were undisclosed in the period and are therefore excluded from the numbers recorded.  

Speaking about the spike in fintech activity in Ireland, Anna Scally, Partner and Fintech Lead at KPMG in Ireland said “The sizeable deals secured by Prepaid Financial Services, Payzone and Fenergo have been a huge boost for Ireland’s fintech eco-system this year. I expect interest and investment in Irish fintechs to remain hot into H2’20, particularly as UK and global fintechs work to ensure they are able to service their customers across Europe in the wake of Brexit. Ireland’s attractiveness as a place for global fintechs to do business also remains strong, with Mastercard announcing plans to grows its European Technology Hub on a new campus site in Leopardstown earlier this year.”

Anna continued, commenting on how COVID-19 has accelerated the move to adopt digital payment methods, saying “Digital payment methods are now mainstream. We saw earlier this year how Irish banks moved swiftly to increase the tap-and-go limit on debit and credit cards to facilitate more cash-less payments in light of COVID-19. We’ve also seen how quickly new financial technologies become embedded. Despite only being in the marketplace in Ireland since 2016, Revolut has now almost become a verb to instruct the transfer of funds.” 

• 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.  

Total fintech investment in EMEA declined significantly, given the lack of mega M&A deals. During H1’20, the region saw $4.6 billion in fintech investment. VC investment in fintech remained strong in H1’20, accounting for US$4 billion in investment.

During H1’20, challenger banks attracted five of the 10 largest deals in EMEA, including Germany-based N26 ($570 million), UK-based Revolut ($500 million), Sweden-based Klarna ($200 million), UK-based Starling Bank ($123 million), and France-based Qonto (US$116 million).

Corporate investment in fintech remained very strong in H1’20, accounting for $12.2 billion in investment across participating deals globally. The US was particularly notable as it saw a record high of over $2.4 billion in corporate investment in Q1’20 – a number almost matched in Q2’20. Corporate investment is expected to remain very strong heading into H2’20, in part due to the strategic nature of investments driven by corporates making investments in digital channels and products in order to serve their customers better in the COVID-19 era.

COVID-19 will remain key driver of change for fintech investment not only in direct fintech solutions, but also in related enabling technologies – such as cybersecurity, fraud prevention and digital identity management. Platform businesses will also continue to be a hot ticket for investors, particularly in less mature jurisdictions.

Commenting on the global picture and outlook, Anna Scally said: “Globally over the remainder of 2020, we will likely see investors continuing to focus on late stage deals and safe bets given the current uncertainty. This will likely create challenges for less mature fintechs who could find themselves in cashflow difficulties and struggling to raise additional funding. In H2’20, there will likely be an increasing number of opportunistic investments by corporates and PE firms looking for good deals.”

* All figures in USD

** Prepaid Financial Services’ is headquartered in London and therefore using PitchBook’s methodology is included in UK figures in the wider report. It is included in the Irish figures in this press release as the company has a front office in Ireland and was founded by Irish entrepreneurs.

For further information on this edition of Pulse of Fintech, please contact Anna Scally, FinTech lead.