Fintech deals double to $1.17 bn during Jan-Jun despite slowdown: Report

The first quarter of 2020 saw fund inflows jumping fivefold and the same in the second quarter added 50 per cent more


Fintech sector | mergers and acquisitions | financial services

In spite of massive disruptions to economic activities across the globe, the domestic fintech space was overactive in the first half of 2020 with the deal value more than doubling to USD 1.7 billion across 70 deals from USD 726.6 million in the year-ago period, according to a report.

Total investments by venture capital funds, private equity players and also mergers and acquisitions by large corporates in the domestic fintech space saw USD 1,052.4 million worth of deals closing in the first quarter of 2020 across 38 transactions, the report by KPMG International said.

It added that the deals, however, dipped to USD 647.5 million involving 32 deals in the second quarter when the whole world was under severe lockdowns to contain the coronavirus pandemic, the report said.

As against this, the first quarter of 2019 saw just USD 272.6 million coming in through the venture capital, private equity and merger and acquisition (M&A) routes, while the same in the second quarter was only USD 454 million, according the report.

Thus, the first quarter of 2020 saw fund inflows jumping fivefold and the same in the second quarter added 50 per cent more.

The whole of 2019 saw fund inflows through these routes scaling to USD 2.75 billion, up from USD 1.92 billion in 2018 and USD 2.55 billion in 2017.

Though the agency warns of more stress on the deal street during the second half, it is optimistic about India remaining a major opportunity for investors over the medium and long term.

Global financial technology (fintech) investments declined to USD 25.6 billion in the first half across 1,221 deals driven down by a sharp drop in M&As which plunged to just USD 4 billion.

In the whole of 2019, the sector attracted investments worth USD 150.4 billion globally.

Sanjay Doshi, partner and head of financial services at KPMG in India, said, “Pre-Covid-19, financial technology-driven financial services, especially in lending, insurance and distribution, have been attracting significant investments.”

He added that the pandemic has fast-tracked the digital economy, and significant investments are being made by established banks and insurers which can also lead to acquisitions and more investments from investors.

Doshi also expects the pandemic to spawn more innovations in the space and thus remain the key driver of change for fintech investments in the rest of the year, given the strong acceleration of digital trends like using contactless payments and demand for and use of digital services.

The ongoing acceleration of digital trends will drive fintech investments not only in direct fintech solutions but also in related enabling technologies like cybersecurity, fraud prevention and digital identity management, according to the report.