Pulse of Fintech H1 2022

H1’22 can be defined by one word: unexpected.

The emergence of largely unforeseen challenges, including major geopolitical shifts, growing inflation and rising interest rates, has caused ripples in the broader investment market. And the fintech market has not been immune.

According to KPMG's Pulse of Fintech H1 2022 report, global fintech investment fell from $111.2 billion in H2’21 to $107.8 billion in H1’22. Still, the market has shown remarkable resilience, with sectors continuing to attract significant funding compared to historical trends, given recent market volatility and global uncertainty.

Total fintech investment in the Asia-Pacific region soared to a record-high of US$41.8 billion in H1'22 — more than double the amount achieved in H2’21 (US$19.2 billion) — primarily as a result of several large mergers and acquisitions (M&A) transactions. The payments space accounted for the largest share of investment (US$43.6 billion), followed by crypto (US$14.2 billion).

In Singapore, fintech funding dropped 15% on a half-yearly basis, from US$2.51 billion in H2’21 to US$2.14 billion in H1’22, with market developments driving greater caution among investors. However, combined deal value in H1'22 marks a three-year high for first half-year performance, up 64% from H1'21 (US$1.31 billion), signalling continued confidence in the potential of fintech developments to drive growth and innovation in financial services. 

The half-yearly drop in Singapore was mirrored in the Americas and EMEA regions, which saw fintech investment dip from US$59.7 billion to US$39.4 billion, and from US$31.6 billion to US$26.6 billion, respectively.  

Key trends across the fintech sector over the past 6 months:

• Declining investment across most jurisdictions, particularly between Q1’22 and Q2’22
• Shuttering of initial public offering (IPO) window in the wake of turmoil in public markets and rapid decline in valuations
• Ongoing strength of payments sector across numerous jurisdictions
  
• Increasing focus on automation and extreme automation in cybersecurity given the ever-increasing number of issues in need of investigation
• Growing diversity of jurisdictions attracting fintech investments, notably US$100 million+ in venture capital funding rounds

Heading into H2'22, market challenges are expected to continue with investors increasingly focused on top-line revenue growth, profitability and cash flow. M&A activity is well-positioned to grow as mature sectors see consolidation and investors look for attractive deals, amid the downward pressure on valuations and as some start-ups contemplate alternatives to downrounds.

Whether you’re the CEO of a large financial institution or the founder of an emerging fintech, understanding how market dynamics have shifted could be critical to your competitiveness and sustainability. Finding ways to become more efficient could help minimise cash burn.

As you delve into findings from our latest edition of Pulse of Fintech, it's time to ask yourself: What can we do now to make sure we’re positioned to face whatever challenges the future might hold?