Fintech funding dropped 2019-2020, but bouncing back again

Global investment in fintech fell significantly in 2020 as the Covid-19 pandemic hit but picked up significantly in the second half of the year, according to KPMG, which expects a strong 2021 for the sector.

In its latest Pulse of Fintech report, KPMG says global investment across M&A, PE and VC was $105 billion across 2861 deals in 2020, down on the $165 billion recorded in 2019.

With the exception of M&A – which saw deal value drop over 50% – the overall fintech market proved resilient despite uncertainties such as the Covid-19 pandemic and the US presidential election.

There was a coronavirus-driven drop off in the first half of the year but fintech investment bounced back in the second half – more than doubling from $33.4 billion to $71.9 billion.

Both the Americas ($23 billion) and Emea ($9.2 billion) regions saw record highs of annual fintech-focused VC investment. US-based wealthtech Robinhood raised the most VC funding in H2 – $1.3 billion across two rounds. Several digital banks also had big rounds – Klarna ($650 million), Revolut ($580 million), and Chime ($533 million).

The US accounted for over 70% of global fintech funding, with $76 billion in investment. In contrast, Asia-Pacific dropped from $16.8 billion in 2019 to $11.6 billion in 2020 – a six-year low.

As for the future, KPMG says that the increase in demand for digital payments, contactless payments and e-commerce platforms means that fintech investment is expected to remain robust well into 2021.

Anton Ruddenklau, global fintech co-leader, KPMG, says: “Covid-19 has been a catalyst for many fintech business models – a real proving ground given the accelerated demand for digital offerings coming from consumers and businesses alike.

“Payments and e-commerce platforms were particularly hot areas of investment, in addition to cybersecurity, given the increasing use of digital platforms.”