FinTech remains the most highly funded industry across new venture markets

The financial technology industry remained the highest-funded sector across emerging venture markets in the first half of 2022, more than tripling to nearly $1.68 billion in the first half of 2022 from a year ago, a new report from Magnitt showed.

While roughly two-thirds of the capital used was raised in the first quarter of the year, there was a 52 percent drop in funding in the second quarter and a 44 percent drop in the number of deals, the startup data platform said in the study.

Payment solutions was the top subsector for investors in 2022, attracting 42 percent of all investments made in FinTech, with annual funding growth of 152 percent, Magnitt said.

“The inflow of capital helped increase the average and median round size across the MEAPT,” Magnitt said, referring to the Middle East, Africa, Pakistan and Turkey.

The startup sector has grown exponentially in recent years as entrepreneurs use innovation to meet consumer needs. They are also increasingly seeking funding from global investors to accelerate their development.

The sector’s growth has increased in line with the increase in digitization in key sectors such as retail, services, e-commerce and government.

Globally, the value created by startups was around $3 trillion in 2020, which is almost on par with the gross domestic product of a G7 economy, according to consulting firm Startup Genome. Funding for these companies broke records in 2021 when it reached $621 billion, according to CB Insights.

In addition, more than 45 unicorns – startups valued at at least $1 billion – are expected to emerge from the Mena region by 2030, led by Saudi Arabia, said a recent report by Riyadh-based venture capital fund STV.

FinTech also led the Mena region, both in terms of funding and number of deals in the first half of 2022, with the UAE as the leading market for venture capital funding, Magnitt said in a report earlier this month.

Magnitt’s study showed that Nigeria was the top destination for FinTech funding, accounting for $533 million, which is a third of total investments. The African nation, along with the United Arab Emirates, Egypt, Kenya and South Africa, accounted for three-quarters of total FinTech investments.

The MENA region, meanwhile, had the highest consolidation of funding, with around 99 percent concentrated in the UAE, Saudi Arabia, Bahrain and Egypt, it added.

The FinTech sector also closed three mega-round deals – investments of at least $100 million – in the first half of 2022, including Flutterwave ($250 million) and Interswitch ($110 million) in Nigeria, and Bahrain’s Rain Financial ($110 million).

Eight FinTech start-ups were acquired in the first half of the year, with Pakistan registering its first in the sector with the acquisition of Tez Financial Services by Swiss Zoodpay.

Active international investors also rose in emerging venture markets in the first six months of 2022, led mainly by US-based investors, who accounted for 26 percent of deals in Mena, 39 percent in Africa and 25 percent in Pakistan.

The exception was Turkey, where around 60 per cent of all investors were based in the country.

Updated: 30 August 2022 at 03.30