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- Crypto investment grows six times compared with 2020
- Cross-border M&A recovers from seven-year low
2021 was a record year of global investment in the payments sector, driven by the continued acceleration of digital trends, increasing adoption and use of digital and contactless payments, and growing demand for alternative payments models like buy now, pay later (BNPL).
In its Pulse of Fintech H2 2021, KPMG finds that fintech deals reached new heights in 2021, with a record number of 5,684 deals that brought in more than $210bn as global fintech investment in venture capital (VC), private equity (PE) and merger and acquisition (M&A) activities.
The largest fintech deals in the second half of 2021 included the $9.2bn acquisition of Denmark’s Nets by Italian payments firm Nexi, the $3.75bn merger of cloud platform company Calypso Technology and regtech AxiomSL, and the $2.7bn acquisition of Japanese Paidy by PayPal.
Among all categories, the payments sector stands out with a record number of 777 transactions worth $51.7bn. This was largely powered by a continued surge in interest in areas like BNPL, embedded banking and open banking solutions.
Although the number of deals shows continuous growth year-on-year, the total value of these payments sector investments is less than half the level of 2019, when the sector received $110.7bn in investment. There was a significant fall in investment activity in 2020 to $29.1bn, as the coronavirus pandemic affected confidence.
“Investment in the payments space continues to boom, both in mature markets like the US and UK — and in emerging markets like Africa, Latin America, and Southeast Asia,” Courtney Trimble, global head of payments at KPMG International, said.
“Throughout 2021, there’s been an extraordinarily high level of VC investment due to the nature of the global economic recovery combined with the digital transformation that has been accelerated by COVID-19,” she added.
Blockchain and crypto were also a very hot sector, attracting a significantly higher amount of investment than any year before in a record number of deals.
There were 1,332 deals struck in the crypto sector last year, double the amount of deals in the previous two years, with investments reaching $30.2bn. This is almost six times the amount of the previous year’s investments ($5.5bn) and more than three times the previous record of $8.2bn seen in 2018.
Cybersecurity ($4.85bn) and wealthtech ($1.62bn) also saw record levels of investments.
Meanwhile, cross-border fintech M&A deal activity appears to be recovering. After falling to a seven-year low of $10.7bn in 2020, the cross-border M&A deal value more than tripled year-on-year to $36.2bn in 2021 and reached a record high number of 275 deals.
“2021 has been an incredibly strong year for the fintech market globally, with the number of deals soaring to record highs across the board,” Anton Ruddenklau, global fintech leader at KPMG, said.
“We are seeing an incredible amount of interest in all manner of fintech companies, with record funding in areas like blockchain and crypto, cybersecurity, and wealthtech. While payments remains a significant driver of fintech activity, the sector is broadening every day.”
