According to the Pulse of Fintech H1’ 2022, a bi-annual report publish by KPMG highlighting global fintech investment trends, Global fintech investments in H1 2022 record $107.8B with 2,980 deals.
Investors in all key jurisdictions continued to flock to the payments space in H1’22, investing $43.6 billion in payments-focused companies.
Given the increasing macroeconomic challenges, investment in the payments space could taper off a bit heading into H2’22, particularly with respect to early-stage deals.
M&A activity is expect to remain strong as a result of increasing consolidation among payments firms and as the number and size of add-in transactions rises.
While the crypto space experienced significant challenges during the first half of 2022, crypto-focused companies attracted $14.2 billion during H1’22.
Going forward, we could see B2B solutions aimed at improvement of infrastructure or on the optimization of operational activities like AR/AP and a continued focus on embedded solutions, including payments, finance, and insurance.
H1’ 2022 Key Global Highlights
- Global investment in fintech falls to $107.8 billion despite robust VC funding
- While VC investment globally declined from $66.5 billion in H2’21 to $52.6 billion in H1’22, compared to all periods outside of 2021, the amount was incredibly robust. The Americas accounted for the largest amount of VC funding ($27.2 billion), while EMEA set a new record high for a six-month period ($16.6 billion)
- In 2021, investment in fintech was quite extraordinary as investors flocked to make investments in the sector. While investment has dropped back to levels seen in previous years, the space is expected to remain a strong focus for investors in H2’22 and into 2023.
- Investment in the payments space remained very strong in H1’22, accounting for $43.6 billion in investment compared to the $60.3 billion seen during all of 2021
- Investment in the insurtech sector dropped considerably, with $3.8 billion of investment globally during H1’22 — well off pace to match the $14.8 billion in investment seen during 2021
- Compared to a number of other areas of fintech, global investment in regtech showed strong resilience in H1’22. Globally, regtech companies attracted $5.6 billion in investment across 157 deals — following a similar trajectory to the level of investment seen in 2021
- After a very strong 2021, wealthtech investment softened considerably in H1’22, mirroring the decline in investment more broadly around the world
- After a record-shattering 2021, global investment in crypto and blockchain fell to $14.2 billion during H1’22
- The turbulence in the public markets globally had a major impact on the valuations of many public tech companies in H1’22, including fintechs. This, combined with other challenging market factors, brought IPO activity almost to a halt — a trend expected to continue through H2’22.
- B2B solutions will become more attractive to investors: As the world teeters on the edge of a recession, fintech investors will likely enhance their focus on B2B companies working to help companies become more efficient or enable them to expand their value propositions
ASPAC and India Highlights
- Fintech investment in the Asia-Pacific region hit an annual record high of $41.8 billion with 607 deals, with 6 months still left in 2022
- The region saw a diversity of jurisdictions attract good-sized deals during H1’22
- In the Asia-Pacific region, a number of fintech subsectors that attracted substantial interest and hype over the past 12 to 24 months cooled off considerably during H1’22, including retail payments, insurtech, and B2C solutions. Crypto, NFTs and blockchain also came off the investment burner as well.
- Regulators are continuing to focus on making industry changes more so in a country like India to support open banking and decentralized finance in an orderly and safe way.
- While investment in areas that saw significant interest during the height of the COVID-19 pandemic have lost some attractiveness, areas that align with rapidly evolving global issues — including rising inflation, increasing interest rates, geopolitical uncertainty, and supply chain woes — have continued to see investment in India and other Asia Pacific countries
Sanjay Doshi, Partner and Head, Financial Services Advisory, KPMG in India Said :
Anton Ruddenklau, Global Head of Financial Services Innovation and Fintech, KPMG International Said :
Uncertain future ahead
H1’22 saw numerous challenges affect the broader investment market, including geopolitical uncertainty, turbulence in the public markets, and rising inflation and interest rates.
With no end in sight to many of these challenges, the fintech market could see activity slowing considerably – particularly compared to the major record highs seen in 2021.
While fintech investment is expected to remain somewhat resilient – particularly in areas like B2B payments, cybersecurity automation, and data-driven analytics – deals could take longer to complete as investors become more critical of opportunities.