Global investments in the fintech industry declined marginally by 3.1 percent to $107.8 billion across 2,980 deals in the first half (H1) of 2022 from $111.2 billion across 3,372 deals in H1 2021, according to a recent report by KPMG international.
The report titled ‘Pulse of fintech H1 2022’ attributed the global decline to numerous factors such as 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 investments in H2 2022 could be quite subdued, particularly compared to the significant record highs experienced in 2021,” the report stated.
Similarly, Anton Ruddenklau, global head of financial services, innovation and fintech at KPMG International said that the fintech market experienced a massive year globally in 2021, which makes it look like investment has somewhat fallen off a cliff so far in 2022.
“That really isn’t the case. We have simply shifted back to levels seen in 2019 and 2020. Taking out 2021’s outlier results, global fintech investments and interest was quite positive in H1,” Ruddenklau further said.
He also added that while the uncertainty permeating the market is expected to continue into H2, the diversity of jurisdiction attracting fintech investments could help keep investment in the space relatively solid over the near- term.
A breakdown of the report shows that the Asia-Pacific region saw total fintech investment more than double from $19.2 billion in H2 2021 to a record $41.8 billion in H1 2022 with the $27.9 billion acquisition of Australia-based Afterpay by Block accounting for more than half of this total.
Both the Americas and Europe, Middle East, and Africa (EMEA) regions saw fintech investment dip from $59.7 billion to $39.4 billion and from $31.6 billion to $26.6 billion respectively.
Venture Capital (VC) investment also declined between H2 2022 and H1 2021 – from $66.5 billion to $52.6 billion.
“The Americas accounted for the largest amount of VC funding ($27.2 billion), while EMEA set a new record high for a six-month period ($16.6 billion), led by the world’s two largest raises during the period: a $1.1billion raise by Germany-based Trade Republic and a $1 billion raise by UK-based Checkout.com,” the report stated.
Fintech investors still have a significant amount of dry powder available to them in many parts of the world, says Judd Caplain, global head of financial series at KPMG International.
“But given the current market climate, they are becoming more discerning with their investments, focusing more on profitability and on the sectors expected to do well in a new challenging market,” Caplain said.
In terms of trends to watch for in H2, the report predicts that there will be a growing focus on B2B solutions aimed at improvement of infrastructure or on the optimization of operational activities like AR/AP and continued focus on embedded solutions, including payments, finance and insurance.
“Big tech companies and other corporations will be prioritizing partnerships, while also looking for opportunities for add-ons at bargain prices compared to recent years.
“Market corrections including declining valuations, increasing M&A and a growing number of distressed businesses in light of the predicted recession and the over enthusiasm and over investment in key areas over the last 18months.
“Slowdown in crypto interest and investment, particularly retail offering coins, tokens and NFTs,” it concluded.