According to the Pulse of Fintech H2’21 – a bi-annual report published by KPMG highlighting global fintech investment trends – total global fintech funding across M&A, PE and VC reached $210 billion across a record 5,684 deals in 2021. Fintech funding in H2’21 accounted for $101 billion of this total – down slightly next to H1’21’s $109 billion.
The largest fintech deals of H2’21 included the $9.2 billion acquisition of Denmark-based payments processor Nets by Italy-based Nexi, the $3.75 billion mergers of fintech cloud platform company Calypso Technology and regtech AxiomSL to form Adenza in the US, and the $2.7 billion acquisition of Japan-based Paidy by PayPal. H2’21 also saw 4 VC funding rounds over $1 billion, including a $2 billion raise by US-based Generate, a $1.1 billion raise by Brazil-based Nubank, a $1.1 billion raise by US-based Chime, and a $1 billion raise by Bahamas-based FTX.
Payments continued to attract the most funding among fintech subsectors, accounting for $51.7 billion in investment globally in 2021 – up from $29.1 billion in 2020. A continued surge in interest in areas like ‘buy now, pay later’, embedded banking, and open banking aligned solutions has helped keep the payments space very robust. Blockchain and crypto was also a very hot sector, attracting a record $30.2 billion in investment – up from $5.5 billion in 2020 and more than three times the previous record of $8.2 billion seen in 2018. Cybersecurity ($4.85 billion) and Wealthtech ($1.62 billion) also saw record levels of investment.
“2021 has been an incredibly strong year for the fintech market globally, with the number of deals soaring to record highs across the board,” said Anton Ruddenklau, Global Fintech Leader, KPMG International. “We’re seeing an incredible amount of interest in all manner of fintech companies, with record funding in areas like blockchain and crypto, cybersecurity, and wealthtech. While payments remain a significant driver of fintech activity, the sector is broadening every day.”
Crypto and blockchain space sees biggest surge in 2021
Global investment in the crypto and blockchain space rose dramatically from $5.4 billion in 2020 to a record high of $30 billion in 2021, while the number of deals rose from 627 to 1,332 over the same period. The sector also saw numerous large deals, including the $1 billion raise by Bahamas-based FTX, a $767 million raise by US-based NYDIG, and a $750 million raise by Celsius Network. The surging investment and deal activity reflects growing recognition for the potential role of crypto and its underlying technologies in modern financial systems.
Both cybersecurity and wealthtech also reached record high levels of investment in 2021, with $4.85 billion and $1.62 billion respectively.
Cross-border M&A sees strong rebound
After falling to a seven-year low of $10.7 billion in 2020, cross-border fintech M&A deal value more than tripled year-over-year to $36.2 billion in 2021. The number of cross-border M&A deals also reached a record high of 275 deals during the year. Both H1’21 and H2’21 saw robust activity. During H1’21, the London Stock Exchange acquired US-based Refinitiv for $14.8 billion and US-based Nasdaq acquired Canada-based Verafin for $2.7 billion, while in H2’21, Italy-based Nexi acquired Denmark-based Nets for $9.2 billion and PayPal acquired Japan-based Paidy for $2.7 billion.
VC funding in the Americas more than doubles
Total fintech investment in the Americas rose from $83.5 billion in 2020 to $105 billion in 2021 ($53.7 billion in H2’21). VC funding accounted for $64.5 billion of 2021 investment – more than double 2020’s record $24.8 billion. The US continued to attract the largest portion of fintech investment in the Americas, accounting for $88 million in total investment during 2021 ($44.4 billion in H2’21). In the Americas more broadly, total fintech investment soared in 2021, with investment rising to record highs in Canada ($7 billion) and Brazil ($5.2 billion).
Heading into 2022, fintech investment is expected to remain very robust, with activity growing in less developed fintech markets, including Africa, Southeast Asia, and Latin America. M&A activity is also expected to rise, with deal values growing as both corporates and fintechs look to grow and build scale. There is also expected to be growing interest in fintech-focused ESG solutions and banking replacements able to address the need for the modernisation of core banking platforms. There will also be an increasing number of fintechs looking brand themselves as data companies rather than simply fintechs.
“Cryptocurrencies and blockchain are expected to remain very hot areas of investment in 2022, with more crypto firms looking to regulators to provide clear guidance on activities in order to help foster and develop the space,” said Anton Ruddenklau, Global Fintech Leader, KPMG International. “Given how many banks are beginning to see the major limitations inherent in their legacy architecture and technologies, there will likely also be a surge in investment into banking replacements able to help them rethink core banking services.”