Americas fintech investment down from 2021 but still robust

Investment in crypto and blockchain slows, while payments and cybersecurity strong

After a record-breaking year of crypto and blockchain investment in the Americas during 2021, investment in the space slowed during the first quarter of 2022. While investment remained very strong compared to pre-2021 results, led by January raises by US-based Fireblocks (US$550m) and Bahamas-based FTX – the rest of the year could present more challenges for companies in the sector.

In contrast, investment in the payments space and cybersecurity is showing some resilience with M&A activity expected to remain strong as a result of increasing consolidation among payments firms and as the number and size of add-in transactions rises.

The US accounted for a strong portion of payments-focused fintech activity in the first half of 2022 both internally and in terms of driving cross-border investments in the sector.

As the world teeters on the edge of a recession, B2B solutions are also expected to become more attractive to investors.

Interest in the challenger bank market remains quite strong too. Banks are focusing on middle market consumers and small businesses — large populations seen as underserved historically. Interest in challenger banks is also growing in Canada, where the banking market has long been dominated by a small number of big banks.

“Most challenger banks will continue to expand into new markets and roll out new products and services in 2022, despite increased funding difficulties and some regulatory challenges in different jurisdictions,” says Courtney Trimble, Principal of Financial Services, KPMG US.

If they want to be successful, she says, challenger banks should focus on ensuring they’ve considered their compliant requirements fully even amidst the rush to be relevant in the market and the industry.

Looking to the second half of 2022 in fintech

According to the report, the second half of 2022 could see increasing interest from investors in M&A opportunities in the Americas as valuations come down and VC firms become more aggressive as fintechs look to raise additional capital.

“VC and PE firms have raised a lot of money, especially in the later half of 2021, so funds are still very liquid,” says Robert Ruark, Principal of Financial Services Strategy and Fintech Leader at KPMG in the US.

“As valuations come down and stabilise and investors become more comfortable with what the outlook looks like, we may see deal activity pick up, but investors are going to want to provide funding at much different valuations than they did before.”

Many will also want to extract more ownership out of their investments than maybe they’ve been able to over the last year or two, he adds.

KPMG’s 2022 H1 Pulse of Fintech report​​​​​​​