PwC: favourable climate for FinTech investors post COVID-19
The long-term outlook remains highly favourable for investors despite COVID-19 dealing a heavy blow to Financial Technology (FinTech) deals, states a new report from Pricewaterhouse Coopers (PwC).
The FinTech deals market will be one of the first areas that sees the fastest recovery during emergence from the pandemic, predicts a report from PwC which shows an optimistic outlook for investors.
Although FinTechs have been adversely impacted by the pandemic, PwC reports that within the sub-sectors there is now a rebound in activities. “The pandemic has created an urgent demand for the benefits that FinTechs can offer and has accelerated trends that were already driving their growth, commented PwC.
“We expect to see FinTech growth accelerate over the coming months and years and, with that, a significant increase in investment into the market behaviours that will be beneficial to FinTech growth, says the report, FinTech deals in focus: What does COVID-19 mean for FinTech investors?
The FinTech deals market will be one of the areas that sees the fastest recovery as we emerge from the pandemic, predicts PwC.
It is reported the policy environment is also becoming more supportive to FinTechs with the Treasury’s announcement of a sector review in the UK, recognising the role they play in supporting the COVID-19 recovery and importance to the future of the financial services sector.
Positive outlook for FinTech
PwC reports that it is starting to see an uptick in deals and a number of FinTech sub-sectors will remain attractive. FinTech has become the fastest-growing sector of the economy in recent years, and the UK has one of the world’s most vibrant FinTech scenes. Prior to the pandemic a record total of around £3.8bn of funds were invested in UK FinTechs in 2019 – up around 38% on 2018.
“In the near term, we expect to see a flight to scale with buyers focusing primarily on established targets with scalable products, established client bases, proven economics and strong balance sheets. Corporates and financial sponsors with existing FinTech portfolios may also benefit from distressed assets, which could offer consolidation opportunities.”
According to the report changes brought by the pandemic have increased the pace of digital adoption among consumers and businesses which has served as a catalyst for incumbent financial services companies to reassess their legacy operations and technology infrastructure.
“We remain upbeat about the outlook for the FinTech deals market and expect it to be an area that sees the fastest recovery post-COVID-19,” predicts PwC.
Sub-sectors remain attractive targets
Although COVID-19 has driven market uncertainty causing a contraction in H1 2020, FinTechs in many sub-sectors remained attractive targets and were largely resilient to the pandemic, reveals the report.
PwC says this should continue to benefit the following areas:
- Core financial services market infrastructure and software platforms
- Capital market / trading platforms
- E-commerce payments
- KYC / AML and other regulatory and governance software and data management and analytics software
“The outlook for the FinTech sector remains upbeat for investors in the long-term. We expect the FinTech deals market will be one of the areas that sees the fastest recovery as we emerge from the pandemic and investors who get a head start by re-engaging with potential targets early could benefit from lower valuations,” concludes the report.