TMCnet News
VC Investment in Fintech Remains Robust as M&A Activity Stalls: KPMG Pulse of FintechWhile overall global fintech funding fell during the first half of 2020, with US$25.6 billion of investment globally across 1,221 deals, corporate deals are driving continued strength in VC activity, according to the Pulse of Fintech H1'20, a bi-annual report on global fintech investment trends from KPMG International. A sharp drop in M&A investment drove most of the decline. During H1'20, M&A accounted for just US$4 billion* of fintech investment (compared to $85.7 billion in H2'19), including the $1.3 billion reverse merger of Open Lending. The stalled M&A reflects both a general slowdown in deal activity and investors pressing pause on major deals in order to re-consider valuations and risk appetite given COVID-19. Despite global uncertainty, VC investment was strong in all regions of the world - and is on track to surpass previous annual record highs should the trend continue. In H1'20, VC investment in fintech accounted for $20 billion, including $9.3 billion in the Americas, $6.7 billion in Asia, and $4 billion in EMEA. Indonesia-based Gojek raised $3 billion in the largest VC deal of the quarter - and the largest fintech deal overall. Gojek competitor Grab accounted for the second largest fintech VC deal ($886 million), followed by Stripe ($850 million). Late-stage deals accounted for a significant proportion of VC investment as mature fintechs continued to attract large funding rounds. Given the long lead times for deal-making, many H1'20 deals were initiated in late 2019. COVID-19 saw new deal activity slow dramatically, except in high-priority sectors like payments. Despite the pandemic, investor interest in platform businesses remained incredibly strong in H1'20, particularly in less mature fintech markets. Platform business continued to see significant investment from investors and large techs. "The Gojek deal is a prime example of how the lines of fintech are blurring. The Indonesia-based platform provider, which also has a digital payment offering, attracted funding from tech giants Facebook (News - Alert), PayPal, Google and Tencent," said Ian Pollari, Global Fintech Co-leader, KPMG International. "The intermingling of big tech platform providers and fintech is only expected to grow as big techs work globally to extend their market reach and value propositions - particularly in markets like Southeast Asia." 2020 Key Highlights
The Americas saw a steep decline in fintech funding, with $12.9 billion of investment in H1'20 compared to $43.3 billion in H2'20. Plummeting M&A investment was responsible for the decline as VC investment in the region was on record pace - with $9.3 billion raised by the end of H1'20. The US accounted for the vast majority of both total fintech investment in the Americas ($11.9 billion) and VC investment ($8.6 billion) - with large deals including the $1.3 billion reverse merger of Open Lending, an $850 million raise by Stripe, the $700 million acquisition of RDC, and a $700 million raise by Chime. The payments space was the hottest sector for VC investment in the US. In addition to Stripe and Chime, B2B payments company AvidXchange raised $388 million. Late stage companies in other fintech sub-verticals also raised large megarounds, including wealthtech Robinhood ($430 million) which raised an additional $200 million in a separate round in mid-August 2020, cryptocurrency firm Bakkt ($300 million), and insurtech Duck Creek Technologies ($230 million).
Challenger banks raise big VC rounds in Europe
During H1'20, challenger banks attracted five of the 10 largest deals in EMEA, including Germany-based N26 ($570 million), UK-based Revolut ($500 million), Sweden-based Klarna ($200 million), UK-based Starling (News - Alert) Bank ($123 million), and France-based Qonto (US$116 million).
Southeast Asia becomes hotspot for fintech activity
Government regulatory efforts were a very strong trend in ASPAC. During H2'20, Australia re-opened submissions to its Select Committee on Financial Technology and Regulatory Technology in order to understand how COVID-19 has affected the fintech sector, while Singapore introduced a licensing program for digital asset exchanges and platforms and Hong Kong (SAR) introduced an 'opt-in' licensing program for digital assets exchanges.
Corporate fintech investment robust in face of COVID-19
Accelerated (News - Alert) digital trends will shape fintech's future
"Over the remainder of 2020, we will likely see investors continuing to focus on late stage deals and safe bets given the current uncertainty. This will likely create challenges for less mature fintechs who could find themselves running out of cash and struggling to raise additional funding," said Anton Ruddenklau, Global Fintech Co-Leader, KPMG International. "In H2'20, there will likely be an increasing number of opportunistic investments by corporates and PE firms look for good deals." *All figures referenced are in USD. About KPMG International KPMG is a global network of professional services firms providing Audit, Tax and Advisory services. We operate in 147 countries and territories and have 219,000 people working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such. View source version on businesswire.com: https://www.businesswire.com/news/home/20200901005262/en/ |