BrazilKPMG financial services experts on the Middle East's fintech scene
Despite the Covid-19 pandemic, funds pumped into FinTech companies globally topped $100 billion for only the third time in history, demonstrating the sector’s growing importance within the wider financial services landscape.
The development of global fintech funding across merger & acquisition, private equity and venture capital deals was a story of two tales in 2020. Following a Covid-19 induced slowdown in the first half of the year, fintech investment bounced back strongly in the second half, more than doubling from $33.4 billion to $71.9 billion.
Having bagged a total of $105 billion across 2,861 deals, 2020 was the third best year on record according to KPMG research. The US drove activity in the M&A segment, accounting for nine of the top ten M&A deals, including TD Ameritrade, Credit Karma ($7.1 billion), Vertafore ($5.3 billion), Iberia Bank ($2.5 billion) and Avaloq ($2.2 billion).
Global venture capital investment into FinTechs reached its second-highest level ever at $42.3 billion, led by Ant Financial $14 billion raising (the world’s largest private financing round ever) and wealthtech Robinhood raising $1.3 billion across two deals. Meanwhile, digital banks were a bright spot, with Sweden-based digital bank Klarna raising $650 million, Revolut raising $580 million, and US-based Chime raising $533 million.
Middle East
The Middle East FinTech scene similarly saw a mixed bag of results. According to KPMG, most economies across the region have “worked diligently to reform their banking and financial services sector to support the evolution of a fintech ecosystem.” In the UAE for example, the government and the sector launched open banking initiatives and are improving access to talent.
Key areas of fintech investment in the UAE included payments, remittances, insurance, online lending, digital banking, crowdfunding and, increasingly, cryptocurrencies and crypto exchanges — particularly in the Abu Dhabi Global Market (ADGM).
Abbas Basrai, Head of Financial Services at KPMG in the Lower Gulf said: “A major change that happened in 2020 is that the UAE’s ADGM signed an MOU with the Israeli Security Authority and Bank Hapoalim to collaborate on FinTech innovation initiatives, including supporting FinTech companies looking to establish a presence in the region. This move will be very beneficial for the further development of both fintech ecosystems.”
In 2021, biometric security systems, blockchain and artificial intelligence are expected to benefit from increased investment in the UAE, in addition to open banking initiatives.
In Saudi Arabia, payments and money transfer focused FinTech’s have seen the most investor interest to date. In 2020, the Kingdom continued to add to its programs that help drive fintech innovation, including improved visa programs for key knowledge workers (Golden Visas) and the Saudi Central Bank fintech regulatory sandbox.
Ovais Shahab, Head of Financial Services at KPMG in Saudi Arabia said: “The challenges of 2020 did present opportunities for the fintech ecosystem to grow manifold – especially in the field of payments as hygiene consideration, e-commerce and other delivery services catalysed cashless transactions.”
Against the backdrop of growing focus on innovation and digitisation in financial services, KPMG is “witnessing increasing interest from FinTech’s wanting to expand their presence in the region” said Manav Prakash and Mahesh Balasubramanian, Bahrain-based Partners in the firm’s Financial Services practice.
