Global fintech investments reach new heights

Global investment in financial technology (fintech) reached record levels in the first half of the year, totalling $98bn from about 2,500 deals.

Figures revealed in KPMG’s latest Pulse of fintech report show the recovery is in full swing after investments were largely stalled during the Covid-19 pandemic.

Last year, $121.5bn was invested in fintech globally, with $87bn of that in the second half. The figures include venture capital and private equity investment, as well as mergers and acquisitions.

“Overall investment in fintech surged to a record high in the first half of 2021 as investors, particularly corporates and venture capitalists, made big bets on market leaders in numerous jurisdictions and across almost all subsectors,” KPMG said in the report.

“Large funding rounds, high valuations and successful exits underscore the thesis that digital engagement of customers that accelerated during the pandemic is here to stay.”

It added that corporates attempting to increase their own digital transformations were investing heavily in fintech businesses. “Under pressure to increase the velocity of their digital transformation and to enhance their digital capabilities, corporates were particularly active in venture deals, with many realising it’s quicker to do so by partnering with, investing in, or acquiring fintechs,” said the report.

In Europe, fintech investments reached $39bn in the first half of 2021, with the UK attracting $26bn. The Nordic region was next, with $4.8bn invested, followed by Germany with investment of $2.5bn and France with $2bn invested.

According to KPMG, 163 tech startups reached unicorn status – valuations over $1bn – in the first half of the year.

For example, in March, hot on the heels of making its first profit, app-based digital challenger bank Starling achieved unicorn status after receiving £272m in funding, led by Fidelity Management & Research Company.

Fintech investments in the US totalled $42bn during the period, with the Americas as a whole receiving $51bn in investments.

KPMG said the second half of the year was set to remain “very robust in most regions of the world”.

It said the payments space looked likely to continue to be a dominant driver of fintech investment and expected security fintechs to be attractive to investors.

“Fintech is an incredibly hot area of investment right now, and that’s not expected to change anytime soon given the increasing number of fintech hubs attracting investments and growing deal sizes and valuations,” said KPMG.

“We anticipate more consolidation will occur, particularly in mature fintech areas as fintechs look to become the dominant market player either regionally or globally.”

The UK is pinning its hopes on fintech as an industry of the future. A Treasury-commissioned review of the UK’s future in fintech told the government in February that it must urgently introduce effective policies in five key areas if the fintech industry is to continue to thrive.

The review, carried out by Ron Kalifa, chairman of fintech giant Worldpay, set out the steps the UK must take if it is to remain one of the world’s leading fintech locations. It recommended upskilling Brits in the ways of fintech and fast-tracking foreign talent, dispersing fintech innovation from London across the country, and increasing funding for fintechs at all stages in their lifecycles.