Global fintech investment fell 30% last year, says KPMG

Investment in fintech cooled last year, falling more than 30% from record highs in 2021, according to KPMG’s annual Pulse of FinTech report.

Global fintech investments amounted to $164.1 billion, a decrease of $238.9 billion compared to the previous year. The number of deals also fell from 7,321 in 2021 to 6,006 in 2022. Despite the seemingly negative numbers, it was actually the third best year for fintech investment and the second best year for fintech deals in fintech’s short history.

The latest findings are in line with developments elsewhere in the financial industry: insurtech funding is set to halve in 2022, Gallagher Re reported earlier this month, and nearly 1,000 insurers have been forced out of the market since the end of 2019.

Turbulent year puts a damper on the crypto space

Regulators are paying more attention to the fintech space as emerging technologies such as digital assets and embedded finance finally come to the fore. This trend is underscored by a record year for regtech firms, which attracted $18.6 billion in investment (up 50% year-over-year). Amid a tightening regulatory environment, KPMG expects the regtech sector to continue to grow over the next 12 months.

On the other hand, there was a decrease in the volume of cryptocurrency investments as the cryptocurrency space was reduced by the Terra (Luna) crash in May and the FTX bankruptcy in November. Total investment in blockchain and cryptocurrencies fell from $30 billion in 2021 to $23 billion last year. This cooling of investor sentiment was reflected in the number of transactions, with just 1,500 deals completed last year, compared to 1,800 last year.

Nevertheless, Debarshi Bandyopadhyay, Director of Financial Services at KPMG believes that this is not a doom and gloom for the crypto space: “In terms of how well the blockchain and crypto space is progressing from a technical development and adoption perspective, 2022 is quite it was decent. El Salvador has not backed away from accepting Bitcoin as a currency. Brazil has recognized Bitcoin as a form of payment. China continued to roll out CBDCs while other jurisdictions began to look at stablecoin offerings, and a number of regulators continued to focus on regulating cryptocurrencies. All these are positive activities.”

US continues to dominate, major deals fail

The US continues to have the largest share of fintech investment, attracting more than US$60 billion across 2,222 deals last year. However, investment in the Americas as a whole fell from US$108.9 billion in 2021 to US$68.6 billion in 2022. However, the region still has the second highest level of fintech deals and the number of transactions has only improved through 2021.

The Asia-Pacific region saw a record high in fintech investment last year. The volume of investments increased from 50.2 billion dollars to 50.5 billion dollars. However, the number of deals fell from 1,604 in 2021 to just 1,227 in 2022. This mixed picture reflects the dominance of the Asia-Pacific deal landscape by Block’s acquisition of Australian buy-now-pay-later firm in the first half of 2021. 2022.

Finally, fintech investment in EMEA fell from USD 79 billion on 2,379 deals in 2021 to USD 44.9 billion on 1,977 deals in 2022. The region saw a decline from the first half of the year to the second half of the year: more than 32 billion USD of investment was recorded in the first half. including six billion dollars worth of deals this year, suggests the region’s fintech sector is experiencing some headaches that may even be reflected in next year’s numbers.

KPMG expects to see fewer large deals this year, calling the likelihood of transactions worth more than $10 billion “relatively low.”

2022 ‘not a bad year for fintech by any means’

Anton Ruddenklau, Global Fintech Leader at KPMG International, says: “While global fintech investment will decline in 2022 – particularly in the second half of the year – as large M&A deals dry up, it is by no means a bad year. Total investment was still the third-highest, while the number of fintech deals is set to hit a record high in 2021. 2022 was a particularly great year for regtech, with investments increasing significantly year-on-year.

In an opinion piece published this week in FinTech Magazine, Leo Labeis, founder and CEO of regulatory technology firm REGnosys, argues that the mission-critical nature of regtech is one of the key factors behind the sector’s recent growth.

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