Fintech investment globally more than doubled during 2018 with an estimated $111 billion or more invested globally in 2018, according to research from KPMG.
“Beyond new fintech-fueled business models, the increasing regulatory and legal obligations emanating from PSD2, GDPR and other regulations are impacting both established players and emerging fintechs,” said Anton Ruddenklau, global co-lead, KPMG Fintech. “As a result, there is increasing interest in technologies — like AI and machine learning — that can be used to help manage compliance requirements more effectively. There’s little doubt that technology investment is going to go up, up, up.”
Last year set multiple record highs across fintech investment, with total global investment dollars across merger & acquisitions, private equity and venture capital more than doubling from $50.8 billion in 2017.
In 2018, fintech investment in the Americas reached $54.5 billion across 1,245 deals.
U.S. fintech companies received $52.5 billion in investment driven primarily by M&A activity.
Investors focused a significant amount of attention on Software-as-a-Service (SaaS) business models in 2018, and investors in the fintech market were no different.
Many of the big tech players are continuously working to expand their cloud-services offerings, including Alibaba, Google and others. While some of these companies are looking to compete directly with financial institutions, others have primarily focused on developing cloud, AI and machine learning products to enable banks and other financial institutions to launch their own fintech solutions or enhance their internal efficiencies.
In 2018, a number of large fintech players also made their own fintech investments. In September, PayPal acquired Europe-based payments platform iZettle for $2.2 billion, while earlier in the year Workday purchased Adaptive Insights for approximately $1.6 billion. Stripe and Credit Karma were also quite active in the M&A space in 2018.
While geopolitical volatility and trade concerns could put a damper on fintech investment in 2019, the outlook is positive for fintech investment heading into 2019, in part due to the strong and highly diverse fintech hubs cropping up around the world, as well as growing recognition from both incumbents and scaled fintech companies that M&A is an important part of their growth strategies. There is likely to be an increase in investment focused on solutions targeted to the needs of unbanked and underbanked people in the developing world, including southeast Asia and Africa, even as more developed regions see a growth in fintechs that can reduce operating costs, improve service quality and expand customer reach.