According to KPMG’s bi-annual report, Pulse of Fintech H2’22, the volume of Australian fintech investment deals dropped from a historical high of 187 in 2021 to 123 in 2022.
Although a record investment of US$30.2 billion was tracked for the year, a significant amount of US$27.9 billion was attributed to the Afterpay acquisition by Block. If this transaction was excluded, fintech investment would have fallen from US$3.01 billion in 2021 to US$2.2 billion in 2022.
Global fintech investment across M&A, PE, and VC saw a decline from its record high of US$238.9 billion in 2021 to US$164.1 billion in 2022, according to the bi-annual report Pulse of Fintech H2’22 by KPMG. Despite the significant drop, 2022 still marked the third-best year for fintech investment and the second strongest year for deal volume.
The decline was more pronounced in the year’s second half, dropping from US$119.2 billion to US$44.9 billion as market conditions continued to shift. Notable deals included the acquisition of Australia-based Afterpay by Block, VC raises for Germany-based Trade Republic and UK-based Checkout.com, and a PE deal for US-based Genesis Digital Assets.
In 2022, Australian fintech investment reached a historic high of US$30.2 billion, primarily due to Block’s US$27.9 billion acquisition of Afterpay. However, excluding this deal, fintech investment declined from US$3.01 billion in 2021 to US$2.2 billion in 2022, with deal volume dropping from 187 to 123 transactions. Globally, fintech investment across M&A, PE, and VC fell from a record high of US$238.9 billion across 7,321 deals in 2021 to US$164.1 billion across 6,006 deals in 2022.
The payments sector remained the strongest area of fintech investment, with US$53.1 billion in investment, and regtech was the only sector to see an increase in investment from US$11.8 billion in 2021 to a record US$18.6 billion in 2022. Investment in crypto and blockchain decreased from US$30 billion in 2021 to US$23.1 billion in 2022, with a significant decline in the second half of the year.
Global M&A deal value dropped from US$105.1 billion in 2021 to US$73.9 billion in 2022, while VC investment declined from US$122.9 billion to US$80.5 billion year-over-year. PE growth investment decreased less sharply, falling from nearly US$11 billion in 2021 to US$9.7 billion in 2022.
The Americas attracted the most investment at US$68.6 billion across 2,786 deals, with the US accounting for the majority of this investment. The Asia-Pacific region attracted US$50.5 billion across 1,227 deals, while EMEA attracted US$44.9 billion across 1,977 deals. Corporate-participating VC investment globally decreased from US$62.8 billion in 2021 to US$39.6 billion in 2022. The median deal size rose for angel and seed-stage deals as well as early-stage VC deals but fell for later-stage VC deals.’
“Over the past few years, we have seen a wave of cash lift the Australian fintech environment – helping to drive mass innovation and create a thriving and vibrant ecosystem of active startups, scaleups and mature businesses,” said KPMG Australia Head of Fintech, Dan Teper.
“We can expect to see some rationalisation in the market as capital flows correct, and some businesses struggle to attract the capital they need to reach their full potential. This in turn, could lead to M&A activity in the coming years. Regardless, the success of Afterpay and the ongoing opportunities to innovate in financial services mean that fintech opportunities and investment will continue to be supported, even if we don’t match the record levels of previous years.”
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