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India almost matched its total fintech investment in 2020, with $2 billion in investment in the first half of 2021, according to KPMG’s Pulse of Fintech, a bi-annual report on fintech investment trends.
India had attracted $2.7 billion in fintech investment in 2020.
Globally, the overall global fintech funding across mergers & acquisition (M&A), private equity (PE) and venture capital (VC) deals soared to a new high with funding increasing from $87 billion in H2’20 to $98 billion in H1’21, across 2,456 deals. This was in comparison to 2030's annual total of $121.5 billion across 3,520 deals.
"Dry powder cash reserves, increasing diversification in hubs and subsectors, and strong activity across the world contributed to the record start to 2021," the report said.
"Fintech valuations remained very high in H1’21 as investors continued to see the space as attractive and well-performing. This likely drove the explosion of unicorn births in the first half of 2021," it added.
The total fintech investment in the Americas amounted to over $51 billion across 1,188 deals while the EMEA (Europe, West Asia and Africa) region recorded $39.1 billion in fintech investment in H1’21.
Fintech investment in the Asia-Pacific region continued at a more moderate pace, reaching $7.5 billion across 467 deals, compared to $13.4 billion across 714 deals during all of 2020.
Corporates were very active in terms of venture deals in a bid to accelerate digital transformation and increasing digital capabilities. They participated in close to $21 billion in investment over nearly 600 deals globally, with many realising its quicker to do so by partnering with, investing in, or acquiring fintechs..
The India scenario
"Digital banking was a big play in India, but with a unique model compared to other jurisdictions in the regions with digital banks acting primarily as SaaS (software as a service) providers and regulatory responsibility remaining with bank partners," the report said.
Insurtech has also been gaining popularity among investors. Insurtech are technology-led startups in the insurance industry.
Early fintech leaders in India have continued to expand their business models into adjacencies to bring more value to customers, for instance, payments players acquiring insurtechs.
Several insurtechs raised mid-sized VC or PE funding rounds in H1'21.
Sanjay Doshi, Partner and Head – Financial Services Advisory, KPMG in India said, “ Exits in India are going to increase, both in terms of IPOs and in terms of acquisitions."
"On the M&A front, fintechs could be targeted by banks, larger fintechs or even a fintech services conglomerate. Over the next 12 months, we expect leading fintech unicorns trying to tap into the strong capital market by looking at an IPO. Banks are also keen to partner with Fintechs especially Neo Banks and Wealthtech platforms," added Doshi.
Global trends
Globally, M&A deals continued at a very healthy pace, accounting for $40.7 billion across 353 deals in H1’21, compared to $74 billion across 502 deals during all of 2020.
Late-stage venture valuations more than doubled year-over-year, with global median pre-money valuations for late stage deals rising from $135 million in 2020 to $325 million towards the end of the first half of 2021.
PE firms embraced the fintech space further in H1’21, contributing $5 billion in investment to fintech— surpassing the previous annual high of $4.7 billion seen in 2018.
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