Global financial technology (fintech) investment remained resilient during the first half of this year, a new report from audit, tax and advisory services firm KPMG shows.

KPMG’s ‘Pulse of Fintech’ for the first half of 2002 shows that the Europe, Middle East and Africa (EMEA) region experienced a significant decline in mergers and acquisitions (M&A); however, venture capital (VC) funding reached record levels during the half-year under review.

Fintech investment in the EMEA region decreased from $31.6-billion to $26.6-billion in the first half of this year, weighed down largely by a 50% decline in M&A deal value from $15.7-billion in the second half of 2021 to $7.2-billion in the half-year under review.

While M&A activity declined significantly, VC investment in the region grew to $16.6-billion in the first half 2022, slightly higher than the previous record high of $16.5-billion in the first half of 2021, led by the world’s two largest raises during the period, namely a $1.1-billion raise by Germany-based Trade Republic and a $1-billion raise by UK-based Checkout.com.

EMEA also saw a record $2.7-billion in private equity (PE) funding in the first half of 2022, including a quarterly record of $2.1-billion in the first quarter.

“As we know, 2021 was a record year for fintech investment in Africa, and the momentum is increasing. While the focus remains payment services and digital banking, we still expect to see more development of other areas such as cybersecurity automation and certainly business-to-business solutions will become even more attractive to investors, which we believe means that fintechs will continue to focus on data-driven solutions,” says KPMG SA digital consulting partner Shamit Govind.

Overall, global fintech investment decreased from $111.2-billion across 3 372 deals in the second half of 2021 to $107.8-billion across 2 980 deals in the first half of 2022.

However, the report indicates that the sector remained remarkably resilient, compared with historical trends, given the challenges affecting the broader investment market, including geopolitical uncertainty, growing inflation and increasing interest rates.

According to KPMG’s ‘Pulse of Fintech’, the Asia-Pacific region saw total fintech investment more than double from $19.2-billion in the second half of 2021 to a record $41.8-billion in the first half of 2022, with the $27.9-billion acquisition of Australia-based Afterpay by Block accounting for more than half of this total.

Fintech investment in the Americas declined from $59.7-billion to $39.4-billion, of which the US accounted for $34.9-billion.

Global M&A activity remained strong in the first half of the year, with $49.1-billion in deal value, including $31.8-billion in Asia-Pacific and $10.1-billion in the Americas.

Overall VC investment declined from $66.5-billion to $52.6-billion during the period under review.

The Americas accounted for the largest amount of VC funding at $27.2-billion, while the Asia-Pacific accounted for $8.7-billion.

Global PE investment remained steady, recording first-half investment of $6.1-billion, including $2-billion in the Americas and $1.3-billion in Asia-Pacific.

According to the report, the payments space remained lucrative during the first half of 2022, securing $43.6-billion in investment, compared with the $60.3-billion secured for the full 2021 year.

Despite major market challenges, crypto and blockchain attracted the second-highest amount of funding, at $14.2-billion, while regulation technology attracted $5.6-billion.

Global investment in the insurtech sector plunged to $3.8-billion in the first half of 2022, compared with the $14.8-billion in investment seen during 2021.

Meanwhile, the ‘Pulse of Fintech’ report reveals that interest in cybersecurity remained strong, with $1.2-billion in investment globally.

“In addition, 2021 was a banner year for the fintech market globally, which makes the first half of 2022 seem slow by comparison,” said KPMG International financial services innovation and fintech global head Anton Ruddenklau says.

“But, in reality, many sectors within the fintech market have shown strength and resilience. While the fintech market will likely be quite challenged in the first half of 2022, owing to global uncertainty and broader economic concerns, fintechs will likely continue to attract significant attention and investment – if at lower levels than last year.”

“Fintech investors are now becoming more discerning with their investments – focusing on profitability and cash flow when evaluating opportunities. “Investors are also likely to pay more attention to areas adjacent to traditional financial services offerings, such as open data and decentralised finance, “ Govind adds.

“Certainly, the business-to-business space is also expected to be a high priority for investors, and we also anticipate increasing focus on underdeveloped fintech markets, including Africa.”