During the first half of 2022, numerous factors combined to affect the upward trajectory of fintech investment globally, including geopolitical uncertainty, turbulent public markets, ongoing supply chain disruptions and challenges, high levels of inflation, and increasing interest rates. With no end in sight to the levels of uncertainty, fintech investment in H2’22 could be quite subdued, particularly compared to the significant record highs experienced in 2021. Here are our top predictions for fintech in H2’22.
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1. Valuations continuing to adjust as cost of capital increases:
As interest rates continue to rise, capital will become more expensive. This will have an impact on valuations, and will drive investors to enhance their focus on cash flow, top line revenue growth and profitability.
2. M&A will increase as corporates and PE firms look for bargains:
Given the downward pressure on valuations, M&A activity will likely increase as investors see the opportunity to make acquisitions at better prices than have been seen in recent years. Startups could also look to sell as an alternative to holding a downround.
3. Interest in cybersecurity automation will keep growing:
With cybersecurity concerns only growing on the radar of most companies, there will likely be an increasing focus on cybersecurity automation as a means to improve cybersecurity management while also managing talent shortages and improving operating efficiencies.
4. 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
5. Fintechs will continue to focus on data-driven solutions:
Fintech companies will continue to focus on finding unique ways to collect, assess, and utilize data in order to differentiate their offerings—in the eyes of both corporates and consumers.
6. Crypto and blockchain investments will increasingly focus on infrastructure:
While investment in cryptocurrencies is expected to slowdown further, there will likely be a continued focus on the use of blockchain in financial market modernization.
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Global investment in fintech falls to $107.8 billion despite robust VC funding
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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.
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