Investment activity rebounds for Irish fintechs

Irish fintechs secured close to $400 million (€336 million) in M&A, venture capital and private equity transactions in 2020 with investments tailing off significantly in the second half of the year.

New figures show after a record start to the year when $328.6 million was secured by Irish fintechs, just $68.6 million was raised in the latter half due to the Covid-19 crisis.

In the third quarter, $4.2 million in investment was recorded although it rebounded in the final three months of the year to $64.4 million on the back of transactions involving Immedis and Wayflyer.

The sale of Prepaid Financial Services to EML was the biggest deal of the year locally. EML originally agreed to pay 453.6 million Australian dollars (€293.5 million) for the Meath-based fintech but it later secured a €105 million reduction on the purchase price due to the crisis. Despite this, the transaction was still the largest strategic M&A fintech deal globally in the first half of 2020.

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Brexit and pandemic

Other big investments last year included the $83.4 million joint venture acquisition of Payzone Ireland by AIB and First Data, and an $80 million funding round by Fenergo.

KPMG, which compiled the data, said investment activity in Irish fintechs remains steady despite Brexit and the coronavirus pandemic.

"Ireland remains well-positioned to see increased fintech investment post-Brexit from banks and financial institutions choosing Ireland as the base for their European operations," said Anna Scally, partner and fintech lead at KPMG in Ireland.

Incumbent banks

“As well as this outside interest, fintechs are shaking up the marketplace domestically with incumbent banks really recognising the force of their competition,” she added.

Global fintech investments totalled $105.3 billion across 2,861 deals last year, the figures show with a record $4.8 billion in VC funding in EMEA. VC investment in fintech globally rose from $40 billion across 2,834 deals to over $42 billion investment across 2,375 deals in 2020.

“A caution for 2021 will be whether smaller fintechs and start-ups will get left behind. Trends indicate that market activity is very focused on big deals with larger Irish players who are already competing successfully on the global stage. Earlier-stage companies will struggle to scale without investor backing and this will have a knock-on effect for many years to come,” said Ms Scally.