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Fintechs Worldwide Rebounded Strongly in 2H’20 and Beyond: Reports

The second half of 2020 showed significant growth over the first half with respect to worldwide fintech investment deals as H2 doubled those in H1, reads a new report from KPMG. However, 2020 as a whole still checked in well under weight as the year-over-year total compared to 2019 was down to $105 billion from $168 billion.

According to the report, 2019’s “mega M&A” deals, including the $42.5 billion WorldPay acquisition made by FIS, helped contribute to its lofty overall totals. While the 2020 totals lagged due to a rough H1, the second half of the year was able to muster $71.9 billion in deals spanning mergers and acquisitions, private equity and VC deals. Those same deals only yielded $33.4 billion in H1 as the globe was dealing with the initial stages of the COVID-19 pandemic.

Globally, fintechs were able to attract $42.3 billion in VC-specific investment during the course of the year, notes the report, which came close to the all-time high hit in 2018. “US-based wealthtech Robinhood attracted the largest VC investment in H2’20, raising $1.3 billion across two deals in H2’20: a $600 million raise in July and a $668 million raise in October,” according to the article.

There has been longstanding speculation that the fintech space is trending toward accelerated consolidation as the landscape continues to take shape. Ian Pollari, global fintech co-leader, partner and national banking leader at KPMG Australia, said he expects 2021 to yield that very result. “We’re going to see larger and more wide-spread M&A in fintech in 2021–whether it is fintechs seeking to achieve a position of dominant scale in a segment or geography or incumbents needing to accelerate their digital transformation agenda,” Pollari said.

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Image SpeakersThe report also enumerated some important observations about how the overall fintech landscape was impacted by COVID-19. Specifically, digitalization became a critical priority for businesses of every type, including incumbent institutions as well as consumers.

“Radically shifting customer behaviors,” including an emphasis on e-wallets, digital service channels and e-commerce platforms as well as an increase in attention from regulators and governments also defined the year, it adds.

“The changes we have seen this year will not likely stop when COVID-19 wanes. Around the world, people and businesses recognize the importance of agility and responsiveness. Companies across the financial services spectrum now understand what is at stake if they do not embrace digital innovation,” according to KPMG.

In a similar vein, Barkow Consulting issued its own analysis of the VC space, and noted Germany has enjoyed a particularly hot start to 2021 after a cool 2020. Barkow is reporting that fintech investment volume in January was the second most of any year, behind only that of January of 2019.

Further, an article from Crowdfund Insider citing data from Refinitiv Deals Intelligence shows that UK-based firms also rallied as 2020 was coming to a close with a £2.4 billion in venture capital secured during Q4—that figure represents a new high.

“UK firms secured £2.4 billion in capital from 137 different deals during the last three months of 2020, which is up significantly from the £1.3 billion acquired in Q3 2020 from 146 deals. This level of activity represents an 83% increase in value but also a 6% decline in volume year-over-year,” according to the piece.

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