By Megan Doyle
Global payments technologies accounted for the largest share of fintech investment during the first half of 2019, but other fintech sectors including open banking, regulatory technology, and blockchain also received significant investment. According to the Accenture analysis, this steady investment in fintech signals investor confidence in emerging technologies—technologies that could lead to a number of changes for global businesses involved in cross-border payments and international trade.
In the first half of 2019, global fintech investment dropped to $22 billion, compared to $31.2 billion in the same period in 2018. But that $9.2 billion drop (-29 percent) was entirely due to the one 2018 megadeal.2 The actual strength of global fintech investment can be seen in the fact that the total number of deals actually crept up 2 percent year-on-year, according to KPMG’s The Pulse of Fintech 2019 report.3
In the U.S., the value of fintech investment increased 60 percent to $12.7 billion in the first half of 2019, while the number of deals remained relatively unchanged (564 in 2019 compared to 563 in 2018).4 For the same period, fintech investment in the U.K. nearly doubled to about $2.6 billion, while other European markets like Germany, Sweden, and France also saw growth. Singapore and Australia saw large fintech investment as well, but the Asia-Pacific region as a whole saw a drop in fintech funding compared to 2018.5
According to the KPMG report, global fintech investors are gaining a better understanding of which emerging technologies will be sustainable. In particular, investors focused on payments technology, “regtech,” blockchain, and a number of evolving fintech sectors like “insurtech,” “wealthtech,” and “proptech.”6
In the first half of 2019, 28 percent of fintech investment went to global payments technology. According to KPMG, this increase was driven by the industry’s long-term growth potential and the fact that global transactions are becoming increasingly electronic—not to mention the rising diversification of payment methods for businesses and consumers alike.
Fintech investment in open banking is also growing steadily, potentially facilitating partnerships between fintechs and traditional banks. These partnerships could help traditional banks improve customer experience and stay competitive in the era of digital banking by allowing access to open data and open banking technologies, KPMG notes. Specifically, open banking could extend more services to customers and help small businesses automate transactions.
Fintech investment in regtech and cybersecurity is on the rise, as more stringent regulatory requirements like GDPR, PSD2, know your customer (KYC) controls, and other privacy and security regulations continue to emerge and evolve. As a result, many financial firms are turning to regtech to help with compliance.7 Other key areas of cybersecurity investment for fintechs include artificial intelligence, machine learning, data analytics, and real-time risk monitoring.
As banks, cities, and industries become increasing interconnected through digital means, the cyber risk landscape widens, inspiring even more investment in regtech and cybersecurity. “Financial services firms will need to think about security differently. They really need to embrace and deliver security by design (not as an add-on) and understand new and more agile ways of working with regulators, local governments, and national governments to start help shaping the future of the interconnected, digital age…,” according to the KPMG report.8
In a similar vein, the report noted that Singapore’s Fintech Association recently launched a regtech sub-committee to collaborate with other associations in Hong Kong, China, and Japan to promote regtech innovation.
Fintech investment in blockchain dropped about $4 billion in the first half of 2019, but it may be for good reason, say experts. Blockchain hype in 2018 led to a “fear of missing out” mentality for many investors, but recent slow and steady funding may signal a more mature market in which investors are focusing on tangible, real-world applications like trade financing, remittances, and more.9
The KPMG report also notes a rising trend of financial services organizations working together to use blockchain to make global trade more efficient. According to the U.S. Congressional Research Service, blockchain has several of benefits for businesses involved in international trade.10 It can:
Global fintech investment was steady for more nascent sectors like wealthtech, proptech, and insurtech:11
On the surface it appears global fintech investment took a steep fall in early 2019. But a closer look suggests fintech is still growing at a steady pace with little signs of slowing down, once you account for a 2018 megadeal. As a whole, fintech investment appears to be maturing, allowing investors to pinpoint practical global payments technologies with more confidence.
Megan Doyle is a business technology writer and researcher based in Wantagh, NY, whose work focuses primarily on financial services technology.
1. “Global Fintech Fundraising Fell in First Half of 2019, with Decline in China Offsetting Gains in the US and Europe, Accenture Analysis Finds,” Accenture; https://newsroom.accenture.com/news/global-fintech-fundraising-fell-in-first-half-of-2019-with-decline-in-china-offsetting-gains-in-the-us-and-europe-accenture-analysis-finds.htm
3. The Pulse of Fintech 2019, KPMG; https://assets.kpmg/content/dam/kpmg/xx/pdf/2019/07/pulse-of-fintech-h1-2019.pdf
4. “Global Fintech Fundraising Fell in First Half of 2019, with Decline in China Offsetting Gains in the US and Europe, Accenture Analysis Finds,” Accenture; https://newsroom.accenture.com/news/global-fintech-fundraising-fell-in-first-half-of-2019-with-decline-in-china-offsetting-gains-in-the-us-and-europe-accenture-analysis-finds.htm
5. Global Fintech Report Q2 2019, CB Insights; https://www.cbinsights.com/research/report/fintech-trends-q2-2019/
6. The Pulse of Fintech 2019, KPMG; https://assets.kpmg/content/dam/kpmg/xx/pdf/2019/07/pulse-of-fintech-h1-2019.pdf
10. Blockchain and International Trade, Congressional Research Service; https://fas.org/sgp/crs/row/IF10810.pdf
11. Global Fintech Report Q2 2019, CB Insights; https://www.cbinsights.com/research/report/fintech-trends-q2-2019/