Pulse of Fintech H1 2022 – EMEA

Total fintech investment in the EMEA region dropped from $31.6 billion to $26.6 billion between H2’21 and H1’22, driven by a decline in M&A deal value — which sank from $15.7 billion in H2’21 to $7.2 billion in H1’22. The region saw only two $1 billion+ M&A deals during H1’22: the $3.9 billion merger of Italy-based Nexi and SIA and the $1.8 billion acquisition of UK-based Interactive Investor by Abrdn.

Despite the decline in M&A and rapidly evolving geopolitical and macroeconomic challenges, fintech-focused VC and PE funding was incredibly robust in H1’22. VC investment rose from $14.3 billion to $16.6 billion between H2’21 and H1’22 — slightly eclipsing the previous record high of $16.4 billion set in H1’21. PE funding also saw a record high of $2.7 billion in H1’22, including a quarterly record of $2.1 billion in Q1. Key H1’22 highlights from the EMEA region include:

Faced with numerous uncertainties, including the Russia-Ukraine conflict, rising inflation, and rising interest rates, investors in the EMEA region have shifted their primary focus from growth to value. Valuation multiples have decreased significantly for some players (e.g., buy-now-pay-later giant Klarna which heavily focused on growth, saw its valuation drop 85 percent compared to last year²). There is now a lot more emphasis on business fundamentals when making investment decisions, evaluating the sustainability of business models, how profits are generated, and whether cash is being generated or consumed for growth. 

Profitable players such as Starling Bank³ and ClearBank⁴ that facilitate non-financial companies to move into financial services have been able to raise extra funding to grow their expansion further.

Juggling the ongoing avalanche of regulation in the EMEA region and the constant need for more resources to manage compliance has been a major struggle for businesses. With inflation driving operating costs up, there is further increasing interest in affordable compliance solutions and regtech automation that can help make compliance affordable, efficient, and manageable.

During H1’22, the blockchain space reached a significant milestone in Europe with the publication of the Regulation on the EU pilot regime for market infrastructures that use distributed ledger technologies⁵. The regime is effectively a regulatory sandbox. This new program aims to breathe extra institutional interest into blockchain technology in financial services along with the much anticipated Markets in Crypto Assets Framework (MiCA), and the growing interest in central bank digital currencies, with the digital euro potentially to come as soon as 2026.⁶

• Investors spending more time with their current investment portfolio companies to help them through the uncertainty that exists rather than focusing on diversification and new investments.
• Rising interest rates giving banks more cash to spend and more ammunition to invest in strategic players.
• Increasing consolidation across the fintech space as investors become more discerning, weaker fintechs struggle to survive, and well-capitalized companies look to take out some of their competition.
• Fintechs focused on broader ESG and sustainable finance starting to secure more funding than has been seen to-date as regulators have made clear their expectations on firms monitoring and managing their financial risks.⁷ The investment of capital markets actor Euroclear in Greenomy is a case-in-point.⁸
• The fallout of the collapse of the crypto space and any side effects it has on the traditional investment world and on future regulatory action.

Global fintech investments in H1 2022 recorded $107.8B with 2,980 deals

Download this edition for:

• Global and regional analysis with key investment data and insights
• Interview with bolttech and spotlight article on embedded finance
• Fintech segment insights for a deeper dive into payments, insurtech, regtech, wealthtech, cybersecurity, blockchain and cryptocurrency

To learn more about the analysis and topics raised in this edition, or to discuss your organization's unique fintech agenda and roadmap, please contact your local KPMG advisors or the contributors in this publication.