KPMG’s Pulse of Fintech report reveals global FinTech market attracts US$164.1 billion across 6,006 deals in 2022.
After reaching a record US$238.9 billion across 7,321 deals in 2021, total global FinTech investment across M and A, PE and VC fell to US$164.1 billion across 6,006 deals in 2022 – according to the latest Pulse of Fintech report from KPMG.
While results were substantially lower compared to 2021’s peak highs, 2022 was not a poor year as a whole.
The report shows it was the third best year for FinTech investment ever and the second strongest year for deal volume.
But a sharp drop-off in FinTech investment between H1 2022 and H2 2022 from US$119.2 billion to US$44.9 billion highlights the rapidly shifting market conditions much more clearly.
Regionally, the Americas remained the dominant force of fintech investment globally, accounting for US$68.6 billion in investment in 2022 – with the US accounting for US$61.6 billion of this total.
As context, the APAC region reached a marginal new high of US$50.5 billion during 2022 and the EMEA region attracted US$44.9 billion.
While the payments space attracted the largest share of FinTech funding in 2022 (US$53.1 billion), Regtech was the hottest sector of the year, with investment rising from US$11.8 billion in 2021 to US$18.6 billion in 2022.
“2022 was a tale of two FinTech markets. The variance between the first half of the year and the second highlights the rapid shift in investor sentiment amidst a combination of challenges — high inflation and rising interest rates, the lack of IPO exits, the downward pressure on valuations, and, of course, the turbulence in the crypto space,” said Anton Ruddenklau, Global Head of Financial Services Innovation and Fintech, KPMG International.
“But the news wasn’t all negative. Regtech, in particular, saw incredible investment in 2022, while seed-stage deals received excellent attention from investors after years of late-stage deals getting priority.”
Investment in crypto and blockchain fell to US$23.1 billion in 2022 from US$30 billion in 2021.
The decline was particularly noticeable in the second half of the year as investor sentiment related to the consumer crypto space and crypto exchanges plummeted following the Terra (Luna) crash in late H1 2022 and the bankruptcy of crypto hedge company Three Arrows Capital.
As consumer crypto loses lustre, investors are turning attention to broader blockchain-based solutions and value propositions, including institutional use cases and GRC applications. This could drive more diverse investments in the blockchain space in 2023.
FinTech investment in the Americas was US$68.6 billion in 2022, with the US accounting for the vast majority of this total (US$61.6 billion).
By comparison, Canada attracted US$1.3 billion in FinTech investment.
While total investment declined year-over-year in the Americas, angel and seed-stage deals attracted a record US$4.5 billion—up from US$3.4 billion in 2021.
Angel and seed-stage deals also saw the median deal size rise from US$2.4 million to US$3 million year-over-year.
The Americas marked its second strongest year of CVC-participating investment in 2022, with US$18.2 billion of investment; the US accounted for US$14.9 billion of this total.
With no end in sight to the macroeconomic challenges plaguing the public markets, FinTech investment globally is expected to remain quite subdued, even compared to H2 2022.
Deal sizes are seen as likely be much smaller as investors wait for valuations of late-stage companies to settle.
Regtech will likely remain one of the most resilient sections of fintech investment, in addition to B2B solutions within all FinTech verticals.
While investment in crypto was expected to be particularly weak in H1 2023 as investors reconsider their due diligence processes and regulators consider tightening crypto regulations, the broader area of blockchain-based solutions — including institutional use cases, cross-border payments, gaming, and NFTs — will likely gain additional attention from investors.
Despite any short-term softness in the global FinTech market, the long-term outlook for FinTech investment remains quite positive given the ongoing transformation of financial services occurring in many different jurisdictions and the growing focus globally on embedding financial services offerings into other sectors.
