A lack of megamergers resulted in lower total investment in the payments space during 2020, but the number of deals remained high – indicating that the space is still attractive to investors. In fact, the payments sector dominated investment in fintech during the past year.
This is according to a report released recently by KPMG International, which examined the state of fintech investment activity across the world during the past year.
Unsurprisingly, increased demand for digital payment options during the pandemic helped drive investor interest in payments, the report said.
The firm highlighted the growing trend of tech and other non-financial services companies offering embedded payment and financial service solutions on their platforms. It also noted that the financial services needs of small businesses make B2B payments an attractive area for investors, as companies serving these businesses work to expand their capabilities and the services they provide.
The report also acknowledged growing geographic diversity. An increasing number of countries, including Sweden, Poland, Saudi Arabia and Uruguay, have attracted large payment investment deals, it said.
Overall, fintech investment globally reached more than US$105 billion across 2,861 deals in 2020, resulting in the third-highest level of investment in the fintech space ever.
For the coming year, the firm predicted that payments would remain a hot sector attracting investment globally. It expects to see more IPOs and mergers and acquisitions – including more megadeals among large players – as well as growth in embedded payments and buy now, pay later offerings.
“The payments space will continue to be a big focus for investors around the world. Open banking, in particular, will drive increasingly integrated payments solutions. It’s currently mandated or regulated in a number of jurisdictions, primarily in EMEA, but we’re going to start to see it make its way across the pond and into North America, which will further support and facilitate banking-as-a-service platforms,” said Chris Hadorn, global head of payments for KPMG.