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Fintech Deals Showed Signs of Life in '22: KPMG

Fintech deals cooled in 2022, but pockets of promising data sprinkled in a new global market report indicate there are signs of life in the middling space, according to information from KPMG.

The report, KPMG’s Pulse of Fintech, shows the global market attracted $164.1 billion spanning 6,006 deals last year. That's off from 2021’s $238.9 billion over 7,321 deals. Despite the dip, 2022 was still the third best year with respect to fintech investing all time, and the second best year by volume, notes the report.

“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 at KPMG International.

The U.S. Inflation Calculator, which pulls data from the U.S. Labor Department, indicates inflation spiked from 1.4% in 2020 to 7% in 2021. Overall, though, inflation eased slightly since then as the annual inflation rate is now 6.4% for the 12-month period wrapping up in January of 2023. Another update is expected on Tuesday, March 14.

“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,” Ruddenklau added.

According to information in the report, the payments sector appeared to be the strongest subsector of the fintech space as it pulled in $53.1 billion on its own. Additionally, the Regtech sector caught fire jumping from $11.8 billion in deals in 2021 to $18.6 billion last year.

From Twitter 

Bloomberg Crypto @crypto

"The UK’s fintech sector saw investment drop $22 billion to $17 billion in 2022, as higher interest rates, inflation, and declines in valuations hit investor appetite https://www.bloomberg.com/news/articles/2023-02-15/uk-fintech-investment-plummeted-by-almost-60-in-2022-kpmg-says?utmcontent=crypto&utm_campaign=socialflow-organic&utm_source=twitter&utm_medium=social"

As noted by Ruddenklau, the report shows a steep drop off between the first and second half of the year as H1 saw $119.2 billion in deals while H2 only featured $44.9 billion in investment activity. The first half activity was highlighted by the $27.9 billion acquisition of Afterpay, which was scooped up by Block, and notable venture capital raises from Trade Republic and Checkout.com in addition to a private equity deal from Genesis Digital Assets.

The Americas “remained the dominant force” in 2022 and the Asia-Pacific region hit a “marginal new high” of $50.5 billion in activity, it adds.

From Twitter

Fintech News Middle East @MeFintech ·Feb 13

"The region has an excellent opportunity to leapfrog traditional banking infrastructure and develop innovative payment solutions that meet the needs of a young and digital population. https://fintechnews.ae/14896/sponsored/whats-powering-the-fintech-revolution-in-the-middle-east/… @FinastraFS #fintech #MENA #payments #investment #digital #innovation"

“With interest rates still rising, valuations are going to remain quite tricky for some time. This will likely keep a lot of the biggest potential M&A transactions on the shelf as investors wait to see if prices come down even further,” Ruddenklau said. “That said, M&A activity will likely increase for smaller size deals as corporates and larger fintechs look to buy fintech capabilities at good value.”

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