Investor interest and investment in fintech continued to grow across the Americas during 2019, with Latin America in particular seeing significant growth. The proliferation of fintech ecosystems across the Americas is a reflection of the strong opportunities in the sector, whether in traditional payments and lending or in other areas like blockchain, insurtech, regtech or proptech.
Despite a drop in the number of fintech deals in the Americas compared to the high seen in 2018, total fintech investment in the region reached $64.2 billion in 2019, down only slightly from $65.5 billion in 2018. The second half of the year included $29.7 billion in fintech funding during Q3’19.
The US continued to drive the vast majority of fintech funding in the Americas during 2019, however, Canada and Latin America showed some strength. The early year acquisition of Calgary-based Solium by Morgan Stanley (rebranded Shareworks by Morgan Stanley) for $821.5 million and Advent International’s buyout of a number of banks’ stakes in Prisma Medios de Pago for $725 million in Argentina were the sixth and seventh largest deals of the year in the Americas.
After a very strong start to the year, total fintech investment in Canada slowed back down to historical norms during the second half of 2019.
Canada’s fintech market continued to mature, with fintechs attracting significant attention particularly from corporate investors. Large fintechs also showed interest in Canadian companies through the year as evidenced by Broadridge Financial Solutions acquiring RPM Technologies for $302 million.
Due to the strength of Canada’s AI capabilities and innovation ecosystem, fintech investors showed significant interest in Canadian AI companies with fintech offerings. Payments companies continued to be one of the most mature areas of fintech investment in Canada, while wealth management, lending and financing were also key areas of traction with fintech investors in Canada.
Global investors and global financial services companies are increasingly looking at what’s happening in Canada and making investments here – buying best of breed fintechs in their space. A number of Canadian fintechs are really gaining attention from global private equity and VC firms and from global financial institutions. We have seen this quite clearly in a number of recent deals.
The vast geographic diversity of fintech investments across the US helped bolster the US fintech market in 2019. Of the largest deals in the country, only two occurred in and around Silicon Valley, and only one deal occurred in New York. Other $500 million+ fintech deals occurred in numerous states across the US, including Georgia, New Jersey, Washington State, Texas, Virginia, Pennsylvania, Michigan and Florida.
The diversity of fintech investments in the US also showed in the different verticals able to attract significant funding rounds. In addition to more traditional payments and lending companies like Mission Lane and SoFi, Insurtech Assurance IQ, risk management software company Axioma, financial markets technology firm Investment Technology Group, financial performance management company Onestream Software, B2B payments company CSI Enterprises, and financial planning platform company PIEtech all attracted large deals over the course of the year.
It was a very strong year for fintech in the United States. All the disruption that we see across financial services is creating opportunities for fintechs across the board. B2B focused fintechs are particularly attractive to investors given the large number of financial institutions looking for ways to improve their digital offerings and customer experience to their small business and corporate clients – not to mention helping their clients become more operationally efficient.
Latin America continued to heat up in terms of fintech investment, with Brazil in particular attracting several large deals over the course of the year to help it set both a record quarterly high in Q3’19 ($416.2 million) and a new annual record high of $860.9 million in fintech funding. The vast majority of fintech investment in Brazil focused on the digital bank and payments spaces, and Q4’19 was particularly hot for VC investment in fintech in Brazil with several big transactions.
While Brazil saw the most fintech deal activity in Latin America during 2019, other countries also saw some significant deals. For example, Advent International’s buyout of Argentina-based Prisma Medios de Pago for $725 million was Latin America’s largest fintech deal of the year. Konfio, a small business lender based in Mexico, also raised $100 million in Q4’19.
Across the Americas, payments will continue to be a significant driver of fintech investment, while areas like regtech and cybersecurity, particularly related to anti-money laundering (AML) and fraud prevention as the world continues to move toward real-time payments and data sharing, is expected to grow.
In the US, B2B services is expected to be a hot area of investment in 2020, while challenger banks are also expected to gain more traction.
In Canada, the zone where AI meets fintech will continue to be a key area of focus for investors given the country’s continued leadership in the space. It is also well-situated to see a continued uptick in global investment as non-Canadian financial institutions look for best of breed fintech opportunities.
In Latin America, fintech is expected to continue its momentum, particularly in the payments and lending spaces.