Global regtech investment to hit $18.6 billion in 2022, global fintech investment down from 2021 high, KPMG Pulse of Fintech H2’22 report says.

After hitting a record $238.9 billion across 7,321 deals in 2021, total global fintech investment in M&A, private equity and venture capital fell to $164.1 billion across 6,006 deals in 2022. Although the results were significantly lower compared to the peak highs of 2021, 2022 has not been a bad year overall. In fact, it was the third best year ever for fintech investment and the second best year in terms of deal volume, according to KPMG’s biennial Pulse of Fintech H2’22 report, which highlights global fintech investment trends.

A sharp drop in investment in fintech between 1st and 22nd half of the year. 2022, from $119.2 billion to $44.9 billion, is a much clearer indication of rapidly changing market conditions. In the first half of 2022, there were numerous transactions worth more than $1 billion, including eight M&A transactions, including the acquisition of Australian company Afterpay by Block for $27.9 billion, two venture capital raises from Germany Trade Republic and the UK’s Checkout.com, and one private equity deal. American company Genesis Digital Assets.

By comparison, there were only three M&A transactions in H2 2022 for more than $1 billion, all in the US, including the $8.4 billion buyout of Avalara, the $1.7 billion buyout of Billtrust and buyout of Computer Services Inc. for 1.6 billion US dollars. Venture capital raising in 2H 2022 was raised by the Swedish company Klarna for $800 million, which was a significant rounding down (A). The largest private equity deal was US-based Avant, which raised $250 million.

Regionally, the Americas remained the dominant force in fintech investment globally, accounting for $68.6 billion of investment in 2022; the United States accounted for US$61.6 billion of that amount. Asia-Pacific reached a new all-time high of $50.5 billion in 2022, while the EMEA region attracted $44.9 billion. While the payments space attracted the largest share of fintech funding in 2022 ($53.1 billion), regtech was the most popular sector of the year, with investments rising from $11.8 billion in 2021 to $18.6 billion in 2022.

“2022 was the story of two fintech markets. The difference between the first half of the year and the second half of the year highlights the rapid shift in investor sentiment amid a combination of challenges – high inflation and rising interest rates, lack of IPOs, downward pressure on valuations and, of course, turbulence in the crypto space.” said Anton Ruddenklau, Global Head of Financial Services Innovation and Fintech, KPMG International. “But not all news was negative. Regtech, in particular, saw incredible investments made in 2022, while seed-stage deals have received a lot of attention from investors after years of prioritizing late-stage deals.”

Main events of 2022

• Global fintech investment totaled $164.1 billion across 6,006 deals in 2022, up from a record high of $238.9 billion across 7,321 deals in 2021.
• Payments remained the strongest area of ​​fintech investment globally in 2022, with investments of $53.1 billion, up from $57.1 billion in 2021; Regtech was the only sector to reverse the downward trend, with space investment rising from $11.8 billion in 2021 to a record $18.6 billion in 2022.
• Investments in crypto and blockchain have fallen from $30 billion in 2021 to $23.1 billion in 2022. The decline in the second half of the year was particularly sharp as attention to space increased significantly after May Terra (Luna). the collapse and November bankruptcy of FTX.
• The value of global M&A deals fell from $105.1 billion in 2021 to $73.9 billion in 2022; global venture investment decreased from $122.9 billion to $80.5 billion compared to last year. Investment in PE growth declined less sharply, from nearly $11 billion in 2021 to $9.7 billion in 2022.
• In 2022, the Americas raised $68.6 billion from 2,786 deals, of which the US accounted for $61.6 billion from 2,222 deals, while Asia Pacific raised $50.5 billion from 1,227 deals, and the EMEA region raised US$44.9 billion in 1977 deals.
• Global corporate venture investment has fallen from $62.8 billion in 2021 to $39.6 billion in 2022.
• The average deal size has increased for both business angels and seed stage deals (from $1.8 million in 2021 to $2.4 million in 2022), as well as early stage venture capital deals (from USD 5.75 million to USD 6 million) with a reduction for later stages. Venture deals (from USD 15 million to USD 13.9 million).
• Crypto and Blockchain Investors Turn Attention to Institutional Use Cases and GRC

Investments in crypto and blockchain fell to $23.1 billion in 2022 from $30 billion in 2021. The decline was particularly pronounced in the second half of the year as investor sentiment associated with the consumer crypto space and crypto exchanges plummeted following the Terra (Luna) crash at the end of H1 2022 and the bankruptcy of cryptocurrency hedge company Three Arrows Capital in July. As consumer crypto offerings lose their luster, investors have begun to turn their attention to broader blockchain-based solutions and value propositions, including institutional use cases and GRC applications. This could lead to more diverse investments in the blockchain space in 2023.

US spurs fintech investment in America; record seed investment in the region

Fintech investment in the Americas was $68.6 billion in 2022, with the US accounting for the vast majority of that amount ($61.6 billion). By comparison, Brazil has raised $1.8 billion and Canada has raised $1.3 billion in fintech investment. While total investment in the Americas declined year-over-year, angel and seed deals raised a record $4.5 billion, down from $3.4 billion in 2021. The median trade size for angel and seed trades also increased from $2.4. million to 3 million US dollars annually. The Americas also had the second-highest investment year in 2022 involving CVCs, with an investment of $18.2 billion; the United States accounted for US$14.9 billion of this amount.

Fintech investment in Asia-Pacific to rise to record $50.5 billion in 2022

Fintech investment in Asia-Pacific rose to a new all-time high in 2021, rising from $50.2 billion in 2021 to $50.5 billion in 2022. The $27.9 billion acquisition of Australia’s Buy Now, Pay Later in the first half of 2022 accounted for more than half of that total. The impact of one mega deal was particularly noticeable when looking at H1 2022 and H2 2022 results separately: Fintech investment in H2 2022 was only $5.8 billion compared to $44.6 billion in H1 2022.

As a result of the Afterpay acquisition, Australia led fintech investment in the Asia-Pacific region with an investment of $30.2 billion. Despite a decline from $7.9 billion in 2021, investment in India remained strong at $6 billion. In Singapore, investment in fintech rose from $3.4 billion to $4.1 billion compared to last year. Fintech investment in China remained very weak in 2022 at just $770 million.

EMEA sees significant decline in fintech funding year-over-year

Fintech investment in EMEA fell from $79 billion with 2,379 deals in 2021 to $44.9 billion with 1,977 deals in 2022. $12.1 billion. The lack of fintech deals worth more than $1 billion in H2 2022 caused a much bigger drop: the biggest deal in H1 2022 was the $3.9 billion buyout of Italian company SIA compared to the buyout of UK company SIA in the amount of 840 million US dollars. Nucleus Financial Group in the second half of 2022.

Fintech investment is likely to remain low in the first half of 23

With no end in sight to the macroeconomic problems plaguing the public markets and the IPO window expected to remain closed in the first half of 2023, fintech investment globally is expected to remain fairly low, even compared to the second half of 2022. While M&A activity may start picking up, deal sizes are likely to be much smaller as investors wait for late-stage valuations to settle. Regtech is likely to remain one of the most resilient fintech investment segments, in addition to B2B solutions across all fintech verticals. While investment in crypto is expected to be particularly weak in the first half of 2023 as investors review their due diligence processes and regulators consider tightening cryptocurrency regulation, the broader area of ​​blockchain-based solutions, including institutional use cases, cross-border payments, gaming, and NFTs are likely to attract additional investor attention.

Despite short-term weakness in the global fintech market, the long-term outlook for fintech investment remains quite positive given the ongoing transformation of financial services underway in many different jurisdictions and the growing focus around the world on mainstreaming financial services offerings into other sectors.

“With interest rates still rising, valuations will remain quite difficult for some time. This will likely put many of the biggest potential M&A deals on the shelf as investors wait to see if prices fall further.” said Anton Ruddenklau, Global Head of Financial Services Innovation and Fintech, KPMG International.

“However, M&A activity is likely to increase for smaller deals as corporations and larger fintech companies look to buy fintech opportunities at a good price.”

Post-global investment in regtech totaled $18.6 billion in 2022, global investment in fintech has fallen from the high of 2021, according to the KPMG Pulse of Fintech H2’22 report, which first appeared on Fintech Finance.

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