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• Global fintech market attracts U$164.1 billion across 6,006 deals in 2022 �� a strong showing despite falling from the high of US$238.9 billion seen in 2021
• Payments space remains strongest fintech subsector globally, attracting US$53.1 billion in total investment

After reaching a record US$238.9 billion across 7,321 deals in 2021, total global fintech investment across M&A, PE, and VC fell to US$164.1 billion across 6,006 deals in 2022. While results were substantially lower compared to 2021’s peak highs, 2022 was not a poor year as a whole. In fact, it was the third best year for fintech investment ever and the second strongest year for deal volume, according to the Pulse of Fintech H2��22 �� a bi-annual report published by ���㣨Leyu���������� highlighting global fintech investment trends.

The sharp drop-off in fintech investment between H1��22 and H2��22—from US$119.2 billion to US$44.9 billion �� highlights the rapidly shifting market conditions much more clearly. H1��22 saw numerous US$1 billlion+ deals, including eight M&A—including the US$27.9 billion acquisition of Australia-based Afterpay by Block, two VC raises—Germany-based Trade Republic and UK-based Checkout.com, and one PE deal—US-based Genesis Digital Assets.

H2��22 by comparison saw just three M&A deals over US$1 billion—all in the US, including the US$8.4 billion buyout of Avalara, the US$1.7 billion buyout of Billtrust, and the US$1.6 billion buyout of Computer Services Inc. The largest VC raise of H2��22 was an US$800 million raise by Sweden-based Klarna—in what was a significant rounding down (A). The largest PE deal was a US$250 million raise by US-based Avant.

Regionally, the Americas remained the dominant force of fintech investment globally, accounting for US$68.6 billion in investment in 2022; the US accounted for US$61.6 billion of this total. The Asia-Pacific region reached a marginal new high of US$50.5 billion during 2022, while the EMEA region attracted US$44.9 billion. While the payments space attracted the largest share of fintech funding in 2022 (US$53.1 billion), Regtech was the hottest sector of the year, with investment rising from US$11.8 billion in 2021 to US$18.6 billion in 2022.

��2022 was a tale of two fintech markets. The variance between the first half of the year and the second highlights the rapid shift in investor sentiment amidst a combination of challenges �� high inflation and rising interest rates, the lack of IPO exits, the downward pressure on valuations, and, of course, the turbulence in the crypto space,�� said Anton Ruddenklau, Global Head of Financial Services Innovation and Fintech, ���㣨Leyu���������� International. “But the news wasn’t all negative. Regtech, in particular,��saw incredible investment in 2022, while seed-stage deals received excellent attention from investors after years of late-stage deals getting priority.��

• Global fintech investment was US$164.1 billion across 6,006 deals in 2022 �� down from the record high US$238.9 billion across 7,321 deals in 2021.
• Payments remained the strongest area of fintech investment globally in 2022, with US$53.1 billion in investment compared to US$57.1 billion in 2021; Regtech was the only sector to buck the downward trend, with investment in the space rising from US$11.8 billion in 2021 to a record US$18.6 billion in 2022.
• Investment in crypto and blockchain fell from US$30 billion in 2021 to US$23.1 billion in 2022. The decline in the second half of the year was particularly sharp—as scrutiny in the space picked up significantly in the wake of the May Terra (Luna) crash and the November bankruptcy of FTX.
• Global M&A deal value dropped from US$105.1 billion in 2021 to US$73.9 billion in 2022; global VC investment declined from US$122.9 billion to US$80.5 billion year-over-year. PE growth investment dropped less sharply, falling from nearly US$11 billion in 2021 to US$9.7 billion in 2022.
• The Americas attracted US$68.6 billion across 2,786 deals in 2022—of which the US accounted for US$61.6 billion across 2,222 deals, while the Asia-Pacific region attracted US$50.5 billion across 1,227 deals, and EMEA attracted US$44.9 billion across 1,977 deals.
• Corporate-participating VC investment globally fell from US$62.8 billion in 2021 to US$39.6 billion in 2022.
• The median deal size rose for both angel & seed-stage deals (from US$1.8 million in 2021 to US$2.4 million in 2022) and early-stage VC deals (from US$5.75 million to US$6 million)—while falling for later-stage VC deals (from US$15 million to US$13.9 million).

Investment in crypto and blockchain fell to US$23.1 billion in 2022 from US$30 billion in 2021. The decline was particularly noticeable in the second half of the year as investor sentiment related to the consumer crypto space and crypto exchanges plummeted following the Terra (Luna) crash in late H1��22 and the bankruptcy of crypto hedge company Three Arrows Capital in July. With consumer crypto offerings losing their lustre, investors have started to turn their attention to broader blockchain-based solutions and value propositions, including institutional use cases and GRC applications. This could drive more diverse investments in the blockchain space in 2023.

Fintech investment in the Americas was US$68.6 billion in 2022, with the US accounting for the vast majority of this total (US$61.6 billion). By comparison, Brazil attracted US$1.8 billion and Canada attracted US$1.3 billion in fintech investment. While total investment declined year-over-year in the Americas, angel & seed-stage deals attracted a record US$4.5 billion—up from US$3.4 billion in 2021. Angel & seed-stage deals also saw the median deal size rise from US$2.4 million to US$3 million year-over-year. The Americas also saw its second strongest year of CVC-participating investment in 2022, with US$18.2 billion of investment; the US accounted for US$14.9 billion of this total.

Fintech investment in the Asia-Pacific region climbed to a slight new record high in 2021, rising from US$50.2 billion in 2021 to US$50.5 billion in 2022. The US$27.9 billion acquisition of Australia-based buy now, pay later company Afterpay by Block in H1��22 accounted for over half of this total. The impact of the one megadeal was particularly noticeable when looking at H1��22 and H2��22 results separately—with fintech investment in H2��22 just US$5.8 billion, compared to the US$44.6 billion seen in H1��22.

As a result of the Afterpay acquisition, Australia led fintech investment in the Asia-Pacific region—with US$30.2 billion of investment. Despite a decline from 2021’s US$7.9 billion, investment in India remained robust at US$6 billion. Singapore saw fintech investment rise from US$3.4 billion to US$4.1 billion year-over-year. Fintech investment in China remained very weak in 2022 at just US$770 million.

Fintech investment in the EMEA region dropped from US$79 billion across 2,379 deals in 2021 to US$44.9 billion across 1,977 deals in 2022. Investment in H1��22 was far more robust than H2��22, accounting for US$32.8 billion in investment compared to US$12.1 billion. The lack of US$1 billion+ fintech deals in H2��22 accounted for much larger drop-offs—with the largest deal in H1��22 the US$3.9 billion buyout of Italy-based SIA, compared to the US$840 million buyout of UK-based Nucleus Financial Group in H2��22.

With no end in sight to the macroeconomic challenges plaguing the public markets and the IPO window expected to remain closed well into the first half of 2023, fintech investment globally is expected to remain quite subdued, even compared to H2��22. While M&A activity could begin to pick up, deal sizes will likely be much smaller as investors wait for valuations of late-stage companies to settle. Regtech will likely remain one of the most resilient sections of fintech investment, in addition to B2B solutions within all fintech verticals. While investment in crypto is expected to be particularly weak in H1��23 as investors reconsider their due diligence processes and regulators consider tightening crypto regulations, the broader area of blockchain-based solutions �� including institutional use cases, cross-border payments, gaming, and NFTs �� will likely gain additional attention from investors.

Despite any short-term softness in the global fintech market, the long-term outlook for fintech investment remains quite positive given the ongoing transformation of financial services occurring in many different jurisdictions and the growing focus globally on embedding financial services offerings into other sectors.

“With interest rates still rising, valuations are going to remain quite tricky for some time. This will likely keep a lot of the biggest potential M&A transactions on the shelf as investors wait to see if prices come down even further,�� said Anton Ruddenklau, Global Head of Financial Services Innovation and Fintech, ���㣨Leyu���������� International. “That said, M&A activity will likely increase for smaller size deals as corporates and larger fintechs look to buy fintech capabilities at good value.”��

For media queries, please contact:
Brian O’Neill, Senior Manager, Global External Communications
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E: Brian.O’Neill@kpmg.co.uk

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