VC investment in fintech remains ‘robust’ as M&A activity stalls

While overall global fintech funding fell during the first half of 2020, with $25.6bn (£19.2bn) of investment globally across 1,221 deals, corporate deals are driving continued strength in VC activity, according to a new report from KPMG International.

The ‘Pulse of Fintech H1’20’ report found that a “sharp drop” in M&A investment drove most of the decline with M&A accounting for just $4bn (£3bn) of fintech investment, compared with $85.7bn (£64.3bn) in H2’19.

KPMG said the the stalled M&A reflects both a general slowdown in deal activity and investors “pressing pause on major deals” in order to reconsider valuations and risk appetite given COVID-19.

Despite global uncertainty, VC investment was strong in all regions of the world – and is found to be on track to surpass previous annual record highs should the trend continue. In H1’20, VC investment in fintech accounted for $20bn (£15bn).

Indonesia-based Gojek raised $3bn (£2.25bn ) in the largest VC deal of the quarter – and the largest fintech deal overall.

The report also found that Covid-19 saw new deal activity “slow dramatically”, except in high-priority sectors like payments.

Despite the pandemic, investor interest in platform businesses “remained incredibly strong” in H1’20, particularly in less mature fintech markets. Platform business continued to see significant investment from investors and large techs.

Ian Pollari, Global Fintech co-leader KPMG International, said: “The Gojek deal is a prime example of how the lines of fintech are blurring. The Indonesia-based platform provider, which also has a digital payment offering, attracted funding from tech giants Facebook, PayPal, Google and Tencent.

“The intermingling of big tech platform providers and fintech is only expected to grow as big techs work globally to extend their market reach and value propositions – particularly in markets like Southeast Asia.”

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