Global fintech investment fell 30% last year, says KPMG

Fintech investment cooled last year, falling more than 30% from 2021’s record highs, according to KPMG’s annual Pulse of FinTech report.

Global fintech investments totaled $164.1 billion, down from $238.9 billion the previous year. The number of deals also fell from 7,321 in 2021 to 6,006 in 2022. Despite the seemingly negative numbers, it was actually the third best year in fintech’s short history for fintech investment and the second best year ever for fintech dealmaking.

The latest findings are consistent with events elsewhere in the financial services industry: Insurtech funding halved by 2022, Gallagher Re reported earlier this month, with nearly 1,000 insurtech firms out of business since the end of 2019.

Turbulent years put dampers on crypto space

As new technologies such as digital assets and embedded finance finally emerge, regulators are paying more attention to the fintech space. This trend is underscored by a record year for regtech firms, which attracted $18.6 billion in investment (up more than 50% from the previous year). Amidst a tighter regulatory environment, KPMG expects to see the regtech sector continue to grow over the next 12 months.

On the other hand, there was a drop in the amount of crypto investments as the crypto space soured after the Terra (Luna) crash in May and the FTX bankruptcy in November. Total investments in blockchain and cryptocurrencies fell from $30 billion in 2021 to $23 billion last year. This cooling of investor sentiment was reflected in the number of transactions, with just 1,500 deals last year compared to 1,800 the year before.

Nevertheless, KPMG’s director of financial services, Debarshi Bandyopadhyay, believes it’s not all doom and gloom for the crypto space: “In terms of how well the blockchain and crypto space is progressing from a technical development and adoption standpoint, 2022 has been pretty decent. El Salvador has not backed away from adopting Bitcoin as a currency Brazil has recognized Bitcoin as a form of payment China has continued to roll out its CBDC while other jurisdictions have begun to look at stablecoin offerings and more regulators have continued to focus on regulation of cryptoassets. These are all positive activities.”

The US continues to dominate, big deals fall away

The US continues to account for the largest share of fintech investment, attracting over $60 billion across 2,222 deals last year. Across the Americas as a whole, however, investment fell from US$108.9 billion in 2021 to US$68.6 billion in 2022. However, the region still enjoyed its second-highest level of fintech deals, with the number of transactions only improving by 2021.

Asia-Pacific recorded a weak record high level of fintech investment last year. The investment amount rose from USD 50.2 billion to USD 50.5 billion. However, the number of deals fell from 1,604 in 2021 to just 1,227 in 2022. This mixed picture reflects the fact that Asia-Pacific’s deal landscape was dominated by Block’s acquisition of Australian buy-now-pay-later firm Afterpay in the first half of 2022 .

Finally, fintech investments in EMEA fell from USD 79 billion on 2,379 deals in 2021 to USD 44.9 billion on 1,977 deals in 2022. The region saw a decline from H1 to H2: Investments of more than USD 32 billion were recorded in the first half . of the year, including $6 billion in deals, suggesting the region’s fintech sector is experiencing something of a headache that may even be reflected in next year’s numbers.

KPMG expects to see fewer large deals this year, describing the likelihood of transactions worth over $10 billion as “relatively low”.

2022 ‘not a bad year for fintech by any means’

Anton Ruddenklau, Global Fintech Leader at KPMG International, says: “While global fintech investment fell in 2022 – particularly in the second half of the year when large M&A deals dried up – it cannot by any means be characterized as a bad year. Total investments remained the third highest ever, while the number of fintech deals came in second only to 2021’s record high. 2022 was a particularly excellent year for regtech, with investment growing quite significantly year-on-year.”

In an opinion piece published in FinTech Magazine this week, Leo Labeis, founder and CEO of regulatory technology firm REGnosys, argues that the mission-critical nature of regtech is one of the driving factors behind the sector’s recent growth.