Fintech Funding During H1 2020 was Led by Corporate Deals, but Significant Decline in M&A Investments: Report

Although global Fintech funding declined during the first half of this year, with $25.6 billion of total investment secured globally through 1,221 deals, corporate business deals are driving most of the VC activity. This, according to the Pulse of Fintech H1’20, which is a report on global Fintech investment activity that’s published by KPMG International, bi-annually.

There’s been a significant decline in mergers and acquisitions (M&A) related investments. During the first of half of 2020, M&A accounted for only $4 billion of Fintech-related investments which is down considerably when compared to $85.7 billion secured via M&As for the same period last year.

Deal activity in the M&A sector may have stalled because of the economic uncertainty created due to the COVID-19 outbreak and it could also just be a general slowdown in activity in this particular market.

Although the pandemic has led to increased global uncertainty, venture capital investments have been (generally) strong in many regions throughout the world. They’re reportedly on track now to surpass previous highs, as long as the current trend continues. During the first half of 2020, the Fintech sector attracted $20 billion in VC investments – which includes $9.3 billion secured by companies in the Americas, $6.7 billion by Fintechs in Asia, and $4 billion by Fintech firms in the EMEA region.

Indonesia’s Gojek acquired $3 billion in funding, which was by far the largest VC deal of the quarter and also the largest Fintech deal. Meanwhile, Grab secured the second-largest Fintech VC deal, valued at $886 million. Stripe came in third by raising $850 million.

Mature or late-stage Fintechs have been receiving the largest investments during these challenging times, because investors may not feel comfortable with investing in new ventures at this point.

Many H1 2020 Fintech deals had been initiated toward the end last year, however, the pandemic caused new deal activity to slow down significantly. But high-priority Fintech market segments such as payments have done reasonably well.

Investor interest in Fintech platforms and related businesses remained strong during H1 2020, especially for less mature or early-stage financial tech markets. Platform businesses have been attracting significant investments from large tech companies, the report noted.

Ian Pollari, Global Fintech Co-leader, KPMG International, remarked:

“The Gojek deal is a prime example of how the lines of Fintech are blurring. The Indonesia-based platform provider, which also has a digital payment offering, attracted funding from tech giants Facebook, PayPal, Google and Tencent.” 

Pollari added:

“The intermingling of Big Tech platform providers and Fintech is only expected to grow as Big Techs work globally to extend their market reach and value propositions – particularly in markets like Southeast Asia.”

In February 2020, Pollari had stated (when KPMG had also released a Fintech Funding report):

“A number of companies from outside of financial services are working to get into parts of the financial services value chain – either directly or through partnerships – and they’re going to blur the lines of financial services even more. As a result, we expect to see bolder responses from incumbent financial institutions in terms of partnerships, as well as strategic investments and M&A.”

 

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