The Downturn in Global Fintech with the Pandemic

VC investments in the first half of the year accounted for USD 20 billion, with Americas accounting for USD 9.3 billion, Asia with USD 6.7 billion, Europe, Middle East, and Africa accounting for the remaining USD 4 billion.

Fremont, CA: The COVID-19 pandemic has put immense pressure on the banking system. The need for personalized digital solutions, strong capital foundation, and visionary leadership is more significant than ever. Although the impact of the pandemic on the traditional banking sector has been more focused on, the fintech sector has also been one to suffer. The reduced pace of funding, the drop in the establishment of new fintech firms, and declining revenues of the majority of organizations have been a clear indication of the impact of the pandemic. A report on global fintech investment trends from KMPG International revealed that the overall global fintech funding dropped by 25.6 billion worth of investment across 1221 deals during the first half of 2020. The majority of this decline can be attributed to the sharp fall in M&A investment. M&A accounted for just USD 4 billion of fintech investment during the first half of 2020, compared to USD 85.7 billion in the second half of 2019. The stalled M&A is as a result of both a general slowdown in deal activity and investors halting their major deals to re-consider valuation and risks posed by COVID-19.

In contrast, the investment from venture capital firms has been substantial across the globe, despite the global uncertainties. The report suggests that VC investments could surpass the annual record of the trend recorded in the first half of 2020 continues. VC investments in the first half of the year accounted for USD 20 billion, with Americas accounting for USD 9.3 billion, Asia with USD 6.7 billion, Europe, Middle East, and Africa accounting for the remaining USD 4 billion. In the U.S., the payment space proves the hottest sector for VC investment. The report indicates that the late-stage deals had a significant contribution to the total VC investment as mature fintechs continues to attract large funding rounds.

According to the report, the Americas still accounted for the largest share of total fintech investment across the globe by the end of the second quarter of 2020. It is responsible for a USD 12.9 billion investment. The Asia Pacific follows with a USD 8.1 billion of total investment during the first half of last year. Europe, Middle East, and Africa accounted for USD 4.6 billion in fintech investment while M&A activity dropped in all regions of the world