Record-Breaking VC Investment in Fintech in First Half of 2021

KPMG�s Pulse of Fintech reveals investment hit US$98 billion

• US$98 billion in fintech investment (M&A, PE and VC) in H1’21, compared with $121.5 billion during all of 2020.
• Global VC investment in fintech reached a record $52.3 billion in H1’21 – more than doubling the $22.5 billion seen in H2’20.

NEW YORK–(BUSINESS WIRE)–Overall global fintech funding across M&A, PE, and VC deals soared to a new high in H1’21, according to KPMG’s Pulse of Fintech, a bi-annual report on fintech investment trends. Dry powder cash reserves, increasing diversification in hubs and subsectors, and strong activity across the world contributed to the record start to 2021, with funding increasing from US$87.1 billion in H2’20 to US$98 billion in H1’21.

Fintech valuations remained very high in H1’21 as investors continued to see the space as attractive and well-performing – a likely driver in the explosion of unicorn births with 163 created in the first half of the year.

Under pressure to increase the velocity of their digital transformation and to enhance their digital capabilities, corporates were particularly active in venture deals, participating in close to $21 billion in investment over nearly 600 deals globally, with many realizing it’s quicker to do so by partnering with, investing in, or acquiring fintechs.

“Overall investment in fintech surged to a record high in the first half of 2021 as investors, particularly corporates and VC investors, made big bets on market leaders in numerous jurisdictions and across almost all subsectors,” said Ian Pollari, KPMG’s Global Fintech Co-Lead. “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.”

Strong outlook ahead

Looking forward to H2’21, total fintech investment is expected to remain very robust in most regions of the world. While the payments space is expected to remain a dominant driver of fintech investment, revenue-based financing solutions, banking-as-a-service models, and B2B services are expected to attract increasing levels of investment. Given the rise in digital transactions, and the subsequent increase in cyberattacks and ransomware, cybersecurity solutions will likely also be high on the radar of 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 Anton Ruddenklau, KPMG’s Global Fintech Co-Lead. “As we head into H2’21, we anticipate more consolidation will occur, particularly in mature fintech areas as fintechs look to become the dominant market player either regionally or globally.”

H1’21—Key Highlights

• Global fintech investment reached US$98 billion across 2,456 deals in H1’21 – far outpacing last year’s annual total of $121.5 billion across 3,520 deals.
• M&A deals continued at a very healthy pace, accounting for $40.7 billion across 353 deals in H1’21, compared to $74 billion across 502 deals during all of 2020.
• Late-stage venture valuations more than doubled year-over-year, with global median pre-money valuations for late stage deals rising from $135 million in 2020 to $325 million at the end of H1’21.
• Corporate participation in VC investment in fintech was incredibly strong in H1’21, with US$20.8 billion of investment globally. Both the Americas (US$13 billion) and EMEA (US$5 billion) saw record levels of CVC-affiliated investment.
• Global investment in cybersecurity reached a new annual record at mid-year—rising from US$2.2 billion in 2020 to over US$3.7 billion in H1’21.
• Cross-border M&A deal value rose dramatically, from $10.3 billion during all of 2020 to $27.7 billion in H1’21 alone.
• PE firms embraced the fintech space in H1’21, contributing $5 billion in investment to fintech— surpassing the previous annual high of $4.7 billion seen in 2018.
• Total fintech investment in the Americas was very robust with over US$51 billion in investment across 1,188 deals.
• The EMEA region saw US$39.1 billion in fintech investment in H1’21, including a record US$15.1 billion in VC funding.
• Fintech investment in the Asia-Pacific region continued at a more moderate pace, reaching $7.5 billion across 467 deals, compared to $13.4 billion across 714 deals during all of 2020.

The full report can be read at: https://assets.kpmg/content/dam/kpmg/xx/pdf/2021/08/pulse-of-fintech-h1.pdf

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