The volume of FinTech deals reached a three year high in the first three months of 2019, with 198 mergers and acquisitions (M&A) recorded.

Analysis from Hampleton Partners found that the rise in European and North American FinTech deals - up from 164 in the second quarter of 2018 - was followed by record investment from venture capital firms, which reached $10.9 billion in the second quarter of 2019.

Hampleton’s report pointed to a revitalised M&A market since the slump in the second quarter of last year, as well as an overall trend for larger deal sizes: 65 per cent of deals exceeded $100 million in the first half of 2019, compared to just 54 per cent in 2018.

The upward trend in fundraising is also showing no signs of letting up, with 818 fundraises so far in 2019, meaning the anticipated annualised figure of 1,636 would set a new annual record, narrowly beating 2017 (1,632) and in 2016 (1,633).

FinTech funding rounds in North America and Europe are becoming larger, but Asia is not currently sharing the same level of fundraising success, with both fundraise count and value stagnating.

Excluding the three mega-deals in payments processing, enterprise financial software remained the largest FinTech sub-sector, with over 75 per cent of remaining disclosed deal value and just under 50 per cent of all deal volume - 98 deals.

As challengers use their agility to attract new customers, legacy players are forced to acquire the necessary technology to compete, according to Hampleton’s analysis.

It predicted that Investors and acquirers would tend towards targets that focus on automation via disruptive technology, such as real-time payment processing technology; AI chatbots (expected to save banks $7.3 billion annually by 2023); and mobile banking, as in-person branch visits are set to fall 36 per cent between 2017 and 2021.

Challenger banks like Chime, OakNorth and N26 will also continue to grow, the report predicted, while the RegTech sector is on the rise, allowing firms to stay compliant through cloud-based platforms and machine learning.

Jonathan Simnett, director and FinTech specialist at Hampleton Partners, said: “Financial businesses and institutions are increasingly open to adopting large-scale FinTech in transaction processing or enterprise financial software, and as the financial services industry re-structures, competition for game-changing assets is increasing.”

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