Optimism for 2025 Amid Fluctuating Fintech Investments

Over the past five years, the fintech sector in Singapore has experienced notable fluctuations. The period before the pandemic saw slowing deal-making, followed by a post-pandemic surge, peaking at US$3.27 billion in H1'22. However, recent economic headwinds have tempered this momentum, leading to smaller deal sizes and slower large-scale funding. Despite this, there is optimism for 2025, with expectations of a backlog of fintech deals potentially rejuvenating the investment landscape.

Global fintech mega-deals shrink while regional activity shows optimism

Globally, only five US$1 billion+ fintech deals occurred in H1'24, including the buyouts of US-based Worldpay for US$12.5 billion, Canada-based Nuvei for US$6.3 billion, US-based EngageSmart for US$4 billion, UK-based IRIS Software Group for US$4 billion, and Canada-based Plusgrade for US$1 billion. The largest VC deal was a US$999 million raise by UK-based Abound.

Despite the decline in total investment, regional deal volume showed promise. While deal volume globally dipped slightly, the decline was driven entirely by a decline in deal volume in EMEA-from 804 in H2'23 to 689 in H1'24. Comparatively, the Americas saw deal volume rise from 1,066 to 1,123, while ASPAC saw it rise from 406 to 438 in ASPAC, suggesting underlying resilience.

"The high cost of capital and geopolitical uncertainty linked to conflict and elections, have put a significant damper on all global investments so far this year, and the fintech market isn't immune to that," said Karim Haji, Global Head of Financial Services, KPMG International. "Investors are acting cautiously, not only when it comes to large transactions, particularly on the M&A front, given concerns about valuations and the profitability of potential targets, investors are focussed on improving the companies they already own rather than buying new."

Global Key Highlights

* Total global investment in fintech fell from US$62.3 billion across 2,287 deals in H2'23 to US$51.9 billion across 2,255 deals in H1'24.

* In the Americas, total investment fell from US$38.5 billion to US$36.7 billion between H2'23 and H124-including from US$35 billion to US$27.4 billion in the US- while in EMEA it fell from US$19.1 billion to US$11.4 billion, and in ASPAC it dropped from US$4.6 billion to US$3.7 billion.

* Fintech deal volume in the Americas rose from 1,066 to 1,123 deals between H2'23 and H124-including from 866 to 916 deal in the US-while it rose from 406 to 438 deals in ASPAC; deal volume dropped in the EMEA region from 804 to 689 deals.

* Global M&A deal value was US$32.6 billion across 264 deals globally in H1'24. The Americas attracted US$26.8 billion across 130 deals, EMEA attracted US$5.5 billion across 102 deals, and ASPAC attracted US$310 million across 31 deals.

* Global VC investment was US$18.3 billion in H1'24, of which the Americas saw US$9.3 billion-including US$7.6 billion in the US-EMEA saw US$5.4 billion, and ASPAC saw US$3.4 billion.

* Global PE investment was just US$979.5 million in H1'24. The US accounted for all US$568.9 million in PE investment in the Americas, while EMEA saw US$402.8 million, and ASPAC saw just US$7.8 million.

* Corporate CVC investment accounted for US$8.5 billion in VC investment in H1'24, including US$4.4 billion in the Americas (US$3.6 in the US), US$2.23 billion in the EMEA region, and US$1.7 billion in ASPAC.

* Payments accounted for the largest proportion of fintech investment in H1'24, attracting US$21.4 billion.

* Regtech investment reached US$5.3 billion at mid-year-already well ahead the US$3.4 billion seen during all of 2023.

1. Interest in AI heating up in fintech space

AI was quite hot in the eyes of fintech investors in H1'24, particularly in the Americas. The US in particular saw four large AI-focused deals; cyber insurance company Corvus was acquired by Travellers for US$427 million, compensation-focused platform Spiff was acquired by Salesforce for US$419 million, corporate management company Ramp raised a US$150 million VC round, and investment management platform FundGuard raised a US$100 million VC funding round. China-based AI-powered sustainability data company MioTech also raised a US$150 million VC round in H1'24.

2. After a slow 2023, investment in payments and regtech rebound

After a very quiet year of investment in 2023, both the payments sector and the regtech sector saw VC investment rebound quite solidly in H1'24. The payments space attracted US$21.4 billion in investment during H1'24, compared to the US$22.7 billion seen during all of 2023, while regtech attracted US$5.3 billion in investment, compared to just US$3.4 billion during all of 2023. Meanwhile, insurtech investment dried up significantly in H1'24-attracting US$1.6 billion in investment-less than one-quarter of the US$8.2 billion seen in 2023.

3. Americas sees small drop in fintech investment; number of deals rises

Fintech investment in the Americas was US$36.7 billion in H1'24-down slightly compared to the US$38.5 billion in H2'25. The US accounted for US$27.4 billion of this investment, including the US$12.5 billion acquisition of Worldpay by GTCR, the US$4 billion buyout of B2B customer engagement platform EngageSmart by Vista Equity Partners, the US$930 million acquisition of financial research firm Tegas by AlphaSense, and the US$685 million VC raise by capital markets platform company Clear Street.

Fintech investment in Canada reached a record high of US$7.8 billion for a six-month period in H1'24, driven by the US$6.3 billion acquisition of payments firm Nuvei by Advent International and the US$1 billion buyout of revenue solutions firm Plusgrade by General Atlantic. Meanwhile Brazil had a quiet quarter of fintech investment, attracting just US$616 billion in H1'24 compared to US$1.8 billion in H2'23.

4. ASPAC region sees slowest quarter of investment since Q3'17

Fintech investment in the ASPAC region fell from US$4.6 billion in H2'23 to $3.7 billion in H1'24. Much smaller deal sizes accounted for the decline, with a US$280 million VC raise by China-based capital markets solutions firm Yi'an Enterprise accounting for the largest deal of the quarter, followed by a US$209 million VC raise by India-based personal loan platform KreditBee, a US$195 million VC raise by Thailand-based digital financial solutions firm Ascend, and US$150 million VC raises by China-based ESG financial solutions firm MioTech and Australia-based performance management firm Camms.

5. EMEA region sees 40 percent drop in fintech funding

Fintech funding in the EMEA region fell 40 percent, from US$19 billion in H2'23 to just US$11.4 billion in H1'24. Continued geopolitical uncertainty, including elections in the EU, UK, and France, combined with the high interest rate environment kept investment quite subdued. The UK accounted for the largest share of fintech investment in the EMEA region (US$7.3 billion), including the US$4 billion buyout of financial software company IRIS Software Group by Leonard Green, the US$999 million VC raise by SMB marketplace platform Abound, and a US$621 million raise by neobank Monzo. Outside of the UK, the largest deals included the buyout of Italy-based payments firm Banco BPM Gruppo for US$652 million and the acquisition of Switzerland based e-invoicing company Pagero by Thomson Reuters.

6. Early-stage deals provide most optimism heading into H2'24

Fintech investment is expected to remain subdued in H2'24 given the high interest rate environment and resulting high cost of capital, in addition to the approach of the US presidential election. AI will likely be the hottest area of investment as startups work to tailor AI solutions specifically to the financial services sector. There is some optimism that deal volume will continue to increase, but average deal sizes will likely remain small compared to historical norms.

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