VC investment stays strong as cyber security, payments and identity management grab the attention of investors.
By Pete Settles
Overall fintech investment in the Americas dropped sharply in the first half of 2020, driven by a lack of large M&A deals, the result of COVID-19.
But according to the H1’2020 Pulse of Fintech report, Venture Capital (VC) investment remained strong with $8.6 billion in the U.S. and a total of $12.9 billion for the Americas, on pace to exceed the 2019 record.
The U.S. also had five of the top 10 global deals, as U.S. investors looked to fintech companies for growth opportunities. The payments and challenger bank spaces were the hottest sectors for VC investment, with Stripe raising $850 million and Chime raising $700 million.
Fintech investments during the first half of the year put a spotlight on long term trends, including the growing importance of application programming interfaces (APIs) and the blurring of lines between fintech, big tech and platform providers. They also highlighted the acceleration of digital trends, such as the use of digital payments and the importance of digital business models.
“In the U.S., COVID-19 has resulted in uncertainty into what valuations should be, so we will probably continue to see a dip until we get a better sense of the extent and timing of the recovery,” says Robert Ruark, Financial Services strategy and fintech leader, KPMG U.S.
“However, mature fintechs, like those in the payments space, have already started to show signs of recovery. Payments will likely continue to be a very hot and competitive sector for fintech investment, while regtech could grow on the radar of investors as corporates and financial services companies look to better manage risk,” Ruark added.
Cybersecurity continues to be a hot investment area
Over the next six months, cybersecurity is expected to be a strong area of investment, particularly in areas related to cloud security and governance. Access and identity management will likely also be big priorities given the increasing focus on fraud prevention and detection.
“Looking at how people are now working from home and how businesses are now operating, we’re already seeing a huge uptick in interest in cyber security, particularly in consumer identity and access controls, said Charles Jacco, Financial Services Information Protection and Cyber Security Leader, KPMG in the U.S.
“Looking forward, were going to see big interest in fintechs focused on fraud prevention and on providing smooth password-less cyber capabilities. Interest is going to explode if it hasn’t already,” Jacco added.
If you would like to set up an interview with Robert Ruark or Charles Jacco to discuss the report in more detail, please contact Pete Settles @pgsettles or firstname.lastname@example.org.