M&A, venture capital and private equity transactions in the financial technology sector in Ireland declined in the second half of 2020, according to KPMG.

Ten deals in the second half amounted to €57m, down from €87m in H2 of 2019 and €82m in 2018. The H1 2020 total was  €274m, boosted by EML's acquisition of  Prepaid Financial Services for €135m.

Partner Anna Scally said: “Despite the anticipated dip, 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. 

“As well as this outside interest, fintechs are shaking up the marketplace domestically, with incumbent banks really recognising the force of their competition. We’re seeing banks react to make their lending processes more efficient, and we will likely see financial institutions forging more partnerships with early-to-late stage fintechs to accelerate their digital transformation efforts. 

“Ireland's fintech ecosystem is perfectly positioned to provide solutions for institutions which need to adapt quickly and adopt much more streamlined lending processes. This is imperative in order for them to deliver on their digitisation agendas and remain relevant for their clients, particularly SMEs, many of whom are now in trouble as a result of Covid-19.”

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Scally added: “A caution for 2021 will be whether smaller fintechs and startups 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.”

One trend highlighted in the report is ‘Regtech’, or regulatory technology, where companies provide a technology-driven service to facilitate and streamline compliance with regulations and reporting, as well as fraud protection. 

During 2020, interest in regtech solutions skyrocketed as companies worked to digitise processes quickly to support shifting business and consumer demands, and sought efficient and cost-effective ways to manage regulatory requirements. This growing interest drove global regtech funding to €9 billion, well above the previous high of €5 billion seen in 2018.

KPMG has a global summary here, and the full report can be downloaded here.