Americas attracts $105 billion in fintech investment, record $65 billion from VC
Fintech investment in the Americas was robust in 2021, with a record 2,660 deals accounting for $105 billion in investment. After shattering the previous record of $25 billion (2020) at mid-year, VC investment climbed further to reach $65 billion for 2021. PE investment in fintech also reached a high of $5.8 billion — well above the previous record of $1.5 billion set in 2019. Despite M&A value dropping year-over-year, the record number of M&A deals highlights the incredible interest in fintech.
Payments and digital banking still hot in Americas
During 2021, the payments and digital banking space continued to drive significant fintech investment in the Americas. During H2’21, the US saw numerous deals, including the $1.4 billion acquisition of American First Finance by FirstCash and the $1.1 billion VC raise by Chime. Latin America also saw robust investment in H2’21, with Brazil-based Nubank raising $1.1 billion, Argentina-based Uala raising $350 million, and Mexico-based Kueski raising $202 million.
Corporate investment soars to new high
Corporate interest in fintech surged in the Americas in 2021, with CVC-related investment in particular accounting for a record $29 billion across 585 deals — with the US accounting for $22 billion of that total. There has been a strong push among traditional players in financial services to expand their offerings, grow top-line revenue, and capture more of the customer value chain, with both VC and M&A becoming a larger part of their strategies to do so.
Major surge in crypto-focused investments
One of the biggest areas of fintech investment growth in the Americas in 2021 was the crypto space, with interest ranging from crypto exchanges and crypto trading firms to startups offering support services — such as compliance or cybersecurity services — to crypto firms. H2’21 saw a number of large VC raises by crypto-focused companies, including a $1 billion raise by Bahamas-based crypto-exchange FTX and $767 million and $750 million raises by US-based bitcoin platform NYDIG and blockchain-based marketplace platform Celsius Network respectively.
SPAC activity slows in H2’21, remains viable exit option
Fintech-focused SPAC transactions were incredibly strong during H1’21, with reverse mergers by SoFi, Clover Health, Payoneer, and a number of other fintechs in the US. Changes to FTC rules slowed down the market down considerably in the second half of the year, although interest and activity among fintechs remained very robust — with CCI Intelligent Solutions, MoneyLion, Doma Holdings, OppFi, and Bakkt all going public via SPAC during H2’21. Given the tightening timeline for some SPACs to identify targets, interest in fintechs could continue into H1’22.
Investment in B2B fintech solutions growing quickly
B2B services has lagged behind other payments areas in the Americas in terms of innovation. In 2021, while there continued to be lot of investment in B2C companies, there was also a surge in B2B fintechs attracting investment — across VC, PE, M&A, and through reverse mergers – such as Brex, a one-stop finance shop for SMEs, which raised $300 million in H2’21. Particularly in demand are fintechs focused on helping companies manage their AR/AP payment flows.
Trends to watch for in 2022
- increasing investment in crypto — in addition to a push for crypto regulations, driven in part by industry participants
- growing number of corporates and fintechs looking to leverage AI and machine learning across all fintech subsectors, including B2B, cybersecurity, and insurtech
- an increasing number of SPACs looking to the fintech space for opportunities as their time horizon shortens
- increasing deal sizes and a growing breadth of fintechs attracting investments in Latin America.
This article is featured in Pulse of Fintech H2’21.
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VC investment soars and M&A makes a big comeback.
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