A record number of investment deals were completed with financial technology companies last year, driven by soaring interest in blockchain and cryptocurrencies, research by KPMG has found.
The analysis of FinTech funding via mergers and acquisitions (M&A), private equity and venture capital investment found that a total of $210bn (£154bn) was raised across an unprecedented 5,684 deals in 2021.
Blockchain and cryptocurrency firms attracted a record $30.2bn – up from $5.5bn in 2020, and more than three times the previous high of $8.2bn seen in 2018.
However, payments continued to attract the most funding on $51.7bn – up from $29.1bn in 2020 – driven by an ongoing surge in interest in areas like ‘buy now, pay later’, embedded banking, and open banking-aligned solutions.
Cyber security and WealthTech also saw record-levels of investment, attracting $4.85bn and $1.62bn, respectively.
“2021 has been an incredibly strong year for the FinTech market globally, with the number of deals soaring to record highs across the board,” said Anton Ruddenklau, global FinTech leader at KPMG International.
“While payments remains a significant driver of FinTech activity, the sector is broadening every day. We’re seeing an incredible amount of interest in all manner of FinTech companies, with record funding in areas like blockchain and crypto, cyber security, and WealthTech.”
Heading into 2022, KPMG anticipates that FinTech investment will remain very robust, with deals growing in less-developed markets, including Africa, Southeast Asia, and Latin America.
M&A activity is also predicted to rise, while a growing interest in FinTech-focused ESG solutions and banking replacements able to address the need for modernisation of core banking platforms is expected.
Furthermore, KPMG believes that there will be an increasing number of FinTechs looking to brand themselves as data companies, rather than simply FinTechs.
“Cryptocurrencies and blockchain are expected to remain very hot areas of investment in 2022, with more crypto firms looking to regulators to provide clear guidance on activities in order to help foster and develop the space,” Ruddenklau continued.
“Given how many banks are beginning to see the major limitations inherent in their legacy architecture and technologies, there will likely also be a surge in investment into banking replacements able to help them rethink core banking services.”
Image credit: iStock
Author: Chris Seekings