America’s fintech investment down from 2021, but still robust
Investments in crypto and blockchain are slowing, while payments and cybersecurity are strong
After a record year of crypto and blockchain investment in the Americas during 2021, investment in the area slowed during the first quarter of 2022. Although investment remained very strong compared to pre-2021 results, led by increases in January from US-based Fireblocks (US $550m) and Bahamas-based FTX – the rest of the year may present more challenges for companies in the sector.
In contrast, investments in the payments space and cyber security are showing some resilience with M&A activity expected to remain strong as a result of increasing consolidation among payments firms and as the number and size of add-on transactions increase.
The US accounted for a strong share of payment-focused fintech activity in the first half of 2022 both internally and when it comes to driving cross-border investments in the sector.
As the world teeters on the edge of a recession, B2B solutions are also expected to become more attractive to investors.
Interest in the challenger banking market is still quite strong. Banks focus on middle-market consumers and small businesses – large populations historically underserved. Interest in challenger banks is also increasing in Canada, where the banking market has long been dominated by a small number of large banks.
“Most challenger banks will continue to expand into new markets and roll out new products and services in 2022, despite increased funding difficulties and some regulatory challenges in various jurisdictions,” says Courtney TrimbleHead of Financial Services, KPMG US.
If they want to succeed, she says, challenger banks should focus on ensuring they have fully considered their requirements, even amid the rush to be relevant in the market and the industry.
Looking to the second half of 2022 in fintech
According to the report, the second half of 2022 could see growing investor interest in M&A opportunities in the Americas as valuations fall and VC firms become more aggressive as fintechs look to raise additional capital.
“VC and PE firms have raised a lot of money, especially in the latter half of 2021, so the funds are still very liquid,” says Robert Ruarkprincipal for Financial Services Strategy and Fintech manager at KPMG in the USA.
“As valuations fall and stabilize and investors become more comfortable with what the outlook looks like, we may see deal activity pick up, but investors will want to provide financing at much different valuations than they did before.”
Many will also want to extract more ownership from their investments than they may have been able to in the last year or two, he adds.
KPMG’s 2022 H1 Pulse of Fintech Report
