Photo credit: Freepick
In the first half of 2022, many factors such as fluctuating markets all over the world, the continuation of disruptions in supply chains, high inflation levels and increasing interest rates have adversely affected fintech investments. According to the “Pulse of Fintech” report published by KPMG, global investment in fintech was 111.2 billion dollars with 3 thousand 372 transactions in the first half of 2021, while it decreased to 107.8 billion dollars with 2 thousand 980 transactions in the first half of 2022. . “Pulse of Fintech” includes 6 rising trends in the fintech world beyond transaction volumes… Let’s take a closer look at the trends that are expected to shape the industry…
As the cost of capital increases, the valuations of fintech startups will continue to change accordingly. As interest rates continue to rise, capital investments will become more costly. This will have an impact on startups’ valuations and cause investors to focus more on cash flow, revenue growth and profitability.
Mergers and acquisitions will increase as private equity companies seek investment opportunities under more favorable terms. Given the downward pressure on valuations for fintech startups, investors will see this as an opportunity to buy startups at better prices, which will likely increase M&A activity. Startups may also consider selling as an alternative, as their valuations have dropped.
Interest in cybersecurity automation will continue to grow. As cybersecurity concerns are on the radar of more and more companies, it is also important to close the talent gap in this area. Therefore, more focus is likely on cybersecurity automation as a way to improve cybersecurity management and close the talent gap.
B2B solutions will become more attractive to investors. With the world on the brink of a possible recession, fintech investors will likely be more interested in B2B startups focused on helping companies become more efficient or expand their value proposition.
Fintechs will continue to focus on solutions powered by data. Fintech startups will continue to focus on finding unique ways to collect, evaluate and use data to differentiate themselves in the eyes of companies and consumers alike.
Crypto and blockchain investments will increasingly focus on infrastructure. While investment in cryptocurrencies is expected to slow further, the focus will continue to be on the use of blockchain for modernizing financial markets.
“Looking at the fintech sub-sectors, payment systems continue to maintain their strength. Cybersecurity continues to attract great interest from fintech investors.
While it is predicted that fintech investments will remain relatively strong in categories such as B2B payment systems, cyber security automation and data-analytics, it is possible to see a cautious stance on the wing of investors.
As pressure builds on valuations; Fintech investors focus on cash flow, revenue growth and profitability. This can create an obstacle for some fintechs to raise funds. On the other hand, an increase in M&A activities can be expected depending on the exit trend of some players.”