Both the number of global fintech deals and the total global investment in fintech dropped in H1’19, driven primarily by the lack of mega deals like 2018’s $14 billion raise by Ant Financial and the $12.9 billion acquisition of Worldpay by Vantiv. Despite the lack of blockbuster deals, the fintech market globally remained relatively strong and well poised for growth.
Reflecting deals seen in the broader investment market, global fintech investors showed a preference toward a smaller number of larger deals during H1’19, particularly in the more mature markets — such as US, Germany, and the UK, and fintech verticals — like payments and lending. In these sectors, investors have gained a better sense of the vertical winners and the emerging platforms that will be sustainable, and concentrated their investments accordingly. The next 12 to 24 months will be a critical period for many platforms that haven't been able to achieve scale; consolidation is likely to increase as they look for ways to survive and gain market share.
Open banking and open data continued to be front and center for incumbent and challenger banks alike. Fintech companies are providing customer-focused value propositions and seizing opportunities to help incumbent banks leverage open banking (e.g. data sharing, customer management, consent, entitlement, digital identity management). For their part, incumbent banks are allying with fintechs to gain access to the technologies required to improve their customer experience.
The fintech market globally is expected to be hot heading into the remainder of 2019, particularly given the large M&A deals that could close in the US. Payments is expected to continue as the hottest area of investment, while regtech, cybersecurity, insurtech, wealthtech, and proptech are all well positioned for growth – in addition to B2B platform services. Consolidation in payments and other mature areas of fintech will likely speed up as winners continue to solidify their market share. Global expansion of fintechs and global investments are also expected to continue for the foreseeable future.