Fintech investment touches $210 bn; crypto and blockchain lead the charge: KPMG’s Pulse of Fintech H2’21

Kuwait, 20 February 2022

• Record 5,684 fintech deals made; up from 3,674 deals in 2020
• EMEA logs $77 billion in fintech investments; Asia-Pacific follows in with $27.5 billion
• Investment in payments touches $51.7 billion, with the Middle East predicted to grow
• Interest in crypto and blockchain surges as investments rise from $5.5 billion in 2020 to $30.2 billion in 2021

In its latest bi-annual report, Pulse of Fintech H2’21, KPMG revealed that M&A, PE and VC did remarkably well in 2021, with the total global fintech investment across said sectors reaching $210 billion from a historic 5,684 deals. This comprised H2’21’s fintech funding of $101 billion and H1’21’s $109 billion. Funding from PE also increased by more than double, recording $12.2 billion in 2021. In addition, the Americas ($29.7 billion) and EMEA ($11.3 billion) saw new heights as corporate VC investments in fintech peaked in the regions.

Some of H2’21’s largest deals that contributed to this total were Italy-based Nexi’s $9.2 billion acquisition of Denmark-based Nets, the $3.75 billion merger of Calypso Technology and AxiomSL to form Adenza in the US, and PayPal’s $2.7 billion acquisition of the Japan-based company Paidy. Moreover, there were also four VC funding rounds that comprised the US-based Generate raising $2 billion, Brazil-based Nubank raising $1.1 billion, the US-based Chime raising $1.1 billion, and Bahamas-based FTX raising $1 billion.

Investments in payments soared as they rose from $29.1 billion in 2020 to $51.7 billion in 2021 globally, becoming the most-invested fintech subsector. Additionally, areas such as ‘buy now, pay later’, embedded banking, and open banking aligned solutions continued to be of interest to investors, supporting the payments sector. Blockchain and crypto remained hotbeds of investment, drawing a record $30.2 billion in 2021 as compared to 2020’s $5.5 billion. Cybersecurity and Wealthtech, on the other hand, witnessed record investments of $4.8 billion and $1.6 billion, respectively, while Insurtech and Regtech attracted $14.4 billion and $9.9 billion, respectively.

With an investment of $29.8 billion pouring in in H2’21, overall fintech investment in the EMEA region reached about $77 billion. VC investment in the region also soared, surpassing the $30 billion mark, with Germany-based N26 and the UK-based Revolut raising $900 million and $800 million, respectively, in H2’21. Investors remained drawn to fintech even in the EMEA region, helping Africa (~$1.8 billion), Ireland ($1.6 billion), Germany ($5.4 billion), and the Nordic region ($18.5 billion) see new heights in terms of investments in the sector. The sector continued to evolve in the Middle East as Bahrain-based Rain and the UAE-based Tabby raised $75 million and $50 million, respectively, in H2’21. Additionally, developing regions such as the Middle East, Africa and Southeast Asia saw growing investment from Asia-Pacific countries.

Despite dropping to $14.7 billion in 2020, the Asia-Pacific region’s fintech funding climbed to $27.5 billion in 2021. Of it, about $17.4 billion was made in H2’21 and the remaining in H1’21. The region also saw funding in VC bounce from $11.5 billion in 2020 to $19.6 billion in 2021. High investments in fintech continued to pour even in India and South Korea as the countries recorded new highs of $7.2 billion and $3 billion, respectively, while Singapore and Australia logged $4 billion and $2.6 billion, respectively.

The global investment in the crypto and blockchain sector skyrocketed, rising from 2020’s $5.4 billion to $30 billion in 2021 — a record high. Additionally, the number of deals made in 2021 more than doubled as they rose from 627 to 1,332. This surge in investments and deals made is indicative of businesses acknowledging the importance of the role that crypto and its related technologies may play in the future, particularly in the domain of modern financial systems. Furthermore, Bahamas-based FTX, the US-based NYDIG, and Celsius Network raised $1 billion, $767 million, and $750 million, respectively.

The cross-border fintech M&A deal value climbed from a seven-year low of $10.7 billion in 2020 to $36.2 billion in 2021 — increasing by more than triple. As a result, total fintech-focused M&A deal value shot up to $83.1 billion in 2021 from nearly $76 billion in 2020. In addition, activity in H1’21 and H2’21 also soared, resulting in a record 275 deals being made. Among the top activities in H1’21 were the London Stock Exchange’s $14.8 billion acquisition of the US-based Refinitiv and Nasdaq’s $2.7 billion acquisition of Canada-based Verafin. Denmark-based Nets’ $9.2 billion acquisition by Italy-based Nexi and Japan-based Paidy’s $2.7 billion acquisition by PayPal followed in closely as some of the top investments made in H2’21.

Increasing from 2020’s $83.5 billion, fintech investment in the Americas totaled nearly $105 billion in 2021 — with about $53.7 billion of it coming from H2’21. This surge could be credited to the VC funding more than doubling from 2020’s $24.8 billion to $64.5 billion in 2021. In addition, Canada and Brazil also saw record-high fintech investments, raising $7 billion and $5.2 billion, respectively. This contributed to the total fintech investment in the Americas skyrocketing in 2021. The US, however, remained the biggest attraction for fintech investors in the Americas, accounting for a total investment of $88 million in 2021, out of which $44.4 billion was made in H2’21.

Considering the patterns observed in fintech investment in 2021, it is anticipated that investment in the sector will continue to be robust in 2022. Activity in the lesser developed fintech markets such as Southeast Asia, Africa and Latin America is also expected to pick up pace, with the Middle East forecast to grow majorly in the payments space. Additionally, growth in the M&A sector is highly likely considering the surge in deal values, given that corporates and fintechs are bent on growing and scaling up. It is predicted that the interest will increasingly shift toward fintech-focused ESG solutions and banking replacements that can cater to the need for modernization of core banking platforms. It is likely that more businesses will look past just being fintech institutions and rebrand themselves as data companies.