Fintech investment in EMEA drops sharply, from US$79 billion in 2021 to $44.9 billion in 2022
Fintech investment in the EMEA region significantly dropped year-over-year, from $79 billion across 2,379 deals in 2021 to $44.9 billion across 1,977 deals 2022. H1’22 was much stronger than H2’22, accounting for $32.8 billion in investment, including six $1 billion+ deals, including the $3.9 billion buyout of Italy-based SIA, the $2.1 billion acquisition of Sweden-based Tink and the $1.8 billion acquisition of UK-based Interactive investor.
By comparison, H2’22 saw $12 billion in investment, with the largest deals all valued under $1 billion, including the $839 million buyout of UK-based investment management platform Nucleus Financial Group, the $800 million VC raise by Sweden-based BNPL firm Klarna — at a significantly lower valuation than its previous funding round — and the $700 million acquisition of UK-based proximity payments company International Game Technology. Key H2’22 highlights from the EMEA region include:
Regtech investment growing quickly in Europe
Investor interest in the regtech space grew significantly over the course of 2022. This growth is expected to continue despite global macroeconomic challenges given the constantly shifting regulatory environment, the increasing complexity of regulatory compliance and the growing number of companies looking for regtech solutions that can enable them to improve the effectiveness and cost-efficiency of their compliance activities. With more fintech companies in the region also moving up the value chain and into regulated activities, there will likely be increasing demand for regtech solutions aimed at helping them adhere to regulatory requirements.
Insurtech continues to attract solid investment in Europe
The insurtech space attracted solid investment in Europe during H2’22, including a $400 million raise by Germany-based Wefox and an $80 million raise by Israel-based Vesttoo. The insurance industry has been lagging the banking industry in terms of digital transformation in the EMEA region over the past few years, but it is now starting to catch up. Over the last year, a number of incumbent insurers have been making investments in insurtechs to help them embrace digital transformation, or to help them enable platforms and ecosystem offerings.
Despite the drop in both value and volume, it was a strong year for the UK fintech industry. The UK is a major global player, with investment in UK fintech only behind that of the US and Australia. It’s a tale of two halves however, and H1’22 saw significantly more investment and deals than H2’22. The variance highlights the shift in investor sentiment in the face of increasing geopolictical challenges leading to the lack of IPO exits, the downward pressure on valuations, and market turbulence.
Head of Financial Services EMEA Region
Crypto and blockchain deal sizes plummet in H2’22 though infrastructure players maintain investor interest
In H1’22, Europe saw a number of big deals in the crypto and blockchain space, including large VC raises by UK-based Blockchain.com ($490 million) and neobank and investment apps that had added crypto to their product offering like Germany-based Trade Republic ($1.1 billion) and Denmark-based Lunar ($314 million). Following the Terra (Luna) crash, however, investment in the space dropped sharply. Those that were still able to collect large funding tickets had their focus on web3 and digital asset infrastructure layers and included UAE-based Fenix Games ($150 million), Switzerland-based QPQ ($100 million), UK-based Aztec ($100 million), Cyprus-based ZoidPay ($75 million) and Belgium-based KeyRock ($72.8 million). The fallout of the bankruptcy of FTX triggered further demand for crypto regulation, including review of the need of additional refinements to the upcoming European Markets in Crypto Assets Regulation (MiCA), which could prompt further investment selectiveness.
Trends to watch for in H1’23
- The EMEA region, driven by activity in Europe, taking a leadership role in developing and supporting the growth of ESG and green fintechs
- Continued interest and investment in embedded finance, embedded banking and embedded insurance offerings
- Stronger support for the Markets in Crypto-Assets regulation (MiCA), in addition to an impetus to strengthen it further.
As market valuations for many fintechs tumbled, the edge has switched from founders to investors. In parallel, we see increased regulatory attention as the fintech sector further matures. It is a time for savvy investors and fintechs to consolidate and expand in the value chain for regulated services.
Director, Head of Fintech
KPMG in Belgium
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Global Head of Financial Services Innovation and Fintech, KPMG International
Global Head of Financial Services, KPMG International
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Source for chart: Pulse of Fintech H2'22, Global Analysis of Investment in Fintech, KPMG International (data provided by PitchBook), *as of December 31 2022.