Total fintech investment in the EMEA region dropped from US$61.5 billion in 2019 to US$14.4 billion in 2020, in part due to a major decline in large scale M&A activity. VC investment in Europe remained very robust; a record Q3’20 of over US$3 billion helped propel EMEA to an annual record high of US$9.3 billion. Europe drove the vast majority of fintech investment in EMEA, even as the fintech ecosystems in the Middle East and Africa continued to evolve.
Payments companies and challenger banks were very hot with VC investors in EMEA, a trend that accelerated given the digital acceleration seen as a result of the pandemic. In H1’20, three companies raised US$500 million+ rounds, including Sweden-based Klarna (US$650 million), Poland-based Polskie ePlatnosci (US$587 million), and Revolut (US$580 million).
Fintech investment in Europe fell off a cliff in 2020, likely driven by the combination of the pandemic and the uncertainties associated with Brexit. 2020’s largest M&A fintech deal in Europe was the US$2.2 billion acquisition of Switzerland-based banking-as-a-service provider Avaloq by Japan-based NEC Corporation in H2’20 — compared to 2019 when FIS acquired Worldpay for US$42.5 billion.
Numerous governments and regulators across Europe, including the UK, Germany, France and Sweden have worked to develop their fintech ecosystems — and others are following in their footsteps. In H2’20, Spain announced a regulatory sandbox in order to spur its own fintech development.
Countries in the Middle East are making strong inroads in the development of their fintech ecosystems. In H2’20, Saudi Arabia saw STC Pay become its first fintech unicorn. The signing of the Abraham Accords during H2’20 is expected to help propel fintech investment and collaboration between the UAE, Bahrain and Israel.