Global fintech investment fell by $75 billion last year, says KPMG

Global investment in the fintech sector fell by more than 30% last year from 2021’s record highs, according to research from KPMG.

For its Pulse of FinTech report, KPMG analyzed all private equity, venture capital and M&A activity in the fintech sector worldwide. In 2021, these investments amounted to 239 billion dollars, last year the figure was “only” 164 billion dollars.

The fall comes despite a solid start for the scene. In the first quarter of 2022, almost €81 billion was pumped into fintech of all kinds – the second highest quarterly amount since 2019. However, investment quickly cooled in the following three quarters amid unfavorable macroeconomic and geopolitical developments.

The number of agreements similarly fell significantly, down from 7,321 in 2021 to 6,006 in 2022.

Despite the seemingly negative numbers, KPMG’s global fintech leader Anton Ruddenklau said 2022 should not be characterized as a bad year. “Total investment 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.”

Crypto’s cooling

One segment that performed particularly poorly in 2022 was cryptocurrencies. 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.

The decline in crypto was driven by a series of high-profile crashes and scams, best exemplified by Terra (Luna), which saw its market cap crash by nearly 95% in 24 hours (the price of the coin fell from $30 per unit to about $1.60). Then, in November 2022, crypto exchange FTX went bankrupt, wiping out more than $30 billion in value.

For many investors, this and other developments caused them to rethink their crypto investment strategies, and many even decided to leave the scene.

“The call for regulation is increasing,” said Martijn Berghuijs, a partner in KPMG’s Fintech practice. “There is an increasing focus on regulation and compliance, and as a result investment in the regtech segment was a bright spot amid the declining market.”

Last year, $18.6 billion was invested in regtech, a more than fivefold increase in three years. In 2021, this figure was $11.8 billion, and the previous year it was $10.6 billion.

Regional perspective

The US continues to account for the largest share of fintech investment, attracting over $60 billion across 2,222 deals last year. However, across the Americas as a whole, investment fell from $109 billion in 2021 to $69 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 $50 billion to $51 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 investment in EMEA fell from $79 billion on 2,379 deals in 2021 to $45 billion on 1,977 deals in 2022.

Looking ahead into 2023, KPMG expects to see fewer large deals during this year, describing the likelihood of transactions valued above $10 billion as “relatively low”.