H2’20 global fintech investment more than double H1’20 total
After the global pandemic brought many deals to a halt in H1’20, H2’20 reversed the trend as investors and fintechs learned to do business in a new normal.
Fintech investment down significantly in 2020, yet H2’20 shows strength
Fintech investment dropped from US$168 billion in 2019 to US$105 million in 2020, in part due to the lack of mega M&A deals like 2019’s US$42.5 billion acquisition of WorldPay by FIS. After a soft start to the year, H2’20 saw US$71.9 billion in fintech investment across global M&A, PE and VC deals — more than double the US$33.4 billion seen in H1’20.
We’re going to see larger and more wide-spread M&A in fintech in 2021 – whether it is fintechs seeking to achieve a position of dominant scale in a segment or geography or incumbents needing to accelerate their digital transformation agenda.
Global VC investment reaches second-highest level ever
Amidst the pandemic, fintechs attracted US$42.3 billion in VC investment, in a year that ended second only to 2018 — when Ant Financial raised US$14 billion in the world’s largest private financing round ever. US-based wealthtech Robinhood attracted the largest VC investment in H2’20, raising US$1.3 billion across two deals in H2’20: a US$600 million raise in July and a US$668 million raise in October.
Digital banks see big deals in H2’20
Digital banks attracted a number of VC mega rounds in H2’20, with Sweden-based digital bank Klarna raising US$650 million, Revolut raising US$580 million, and US-based Chime raising US$533.8 million.
Unicorn births span the globe
In H2’20, fintech unicorns were born in the US (Next Insurance, Chainalysis, Better.com, Forter, and others), China (Waterdrop), Canada (Wealthsimple), India (Razorpay), the Netherlands (Mollie), and Brazil (Creditas). Two countries also saw their first fintech unicorns: Saudi Arabia (STC Pay) and Uruguay (dLocal). The diversity of these unicorns is a testament to the rapidly evolving global fintech ecosystem.
This year, the US market has really accelerated away from the rest of the fintech market. There’s been interesting action from Gojek and on the digital banking front in Europe, but the reality is that 2020 has been a year where the US and digital payments companies have really excelled.
US drives H2’20 rebound in global M&A
M&A activity grew from US$10.9 billion in H1’20 to over US$50 billion in H2’20 — led by the US$22 billion acquisition of TD Ameritrade by Charles Schwab. Increasing M&A activity in the US drove the rebound, with the US accounting for nine of the top ten M&A deals, including TD Ameritrade, Credit Karma (US$7.1 billion), Vertafore (US$5.3 billion), Iberia Bank (US$2.5 billion) and Avaloq (US$2.2 billion).
Governments prioritizing fintech advances
Fintech was a priority for governments and regulators around the world in 2020. During H2’20:
- The People’s Bank of China began a real-world trial in one district of Shenzhen in October for its central bank digital currency – the digital renminbi.
- The Monetary Authority of Singapore issued its first two digital banking licenses to the Grab-Singtel consortium and to tech giant SEA, in addition to two digital wholesale bank licenses to Ant Group and a consortium including Greenland Financial Holdings Group Co. Ltd, Linklogis Hong Kong Ltd, and Beijing Co-operative Equity Investment Fund Management Co. Ltd.
- A group of central banks, including the Federal Reserve, European Central Bank and Bank of England set out a framework and requirements for offering central bank digital currencies.1
Corporates embracing fintech imperative
Corporate participation in venture investment in fintech was incredibly strong in 2020, helping drive US$21 billion globally, including over US$9 billion in H2’20. Over the next couple of years, corporate investment is expected to grow significantly as more legacy firms continue to take action on the wake-up call provided by COVID-19 by undertaking acquisitions, making CVC investments and forging collaborative partnerships.