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Freshfields TQ

Technology quotient - the ability of an individual, team or organization to harness the power of technology

| 5 minutes read

Freshfields Fintech: predictions for 2022 - #3 Fintech Growth

As 2022 rolls in, it often feels like the only sensible thing to predict is unpredictability. However, encouraged by some of our accurate predictions for 2021, the Freshfields Fintech team has again decided to crowdsource its expectations for the year ahead. This post focuses on growth in the fintech sector – check out our separate posts on regulatory trends and crypto developments.

M&A activity

Alexander: Fintech M&A and IPOs continue to dominate 2021 saw some blockbuster fintech transactions hit the headlines, such as the buyout of Australian buy-now-pay-later company Afterpay by US payment service provider Square/Block (for USD 29b) and the acquisition of the European open banking platform Tink by Visa (for USD 2.1b). Between the dealmaking, the pandemic also continued to work as accelerator for many fintech business models, and we therefore expect a further acceleration of transactional activity in the sector in 2022. The options for inorganic growth are numerous, as fintechs may become party to strategic acquisitions by established (financial or tech) market participants, private equity investments, and consolidation within the fintech sector. As the private funding markets continue to adapt to post-pandemic economic changes, we are also likely to see more fintech companies going public through IPOs or de-SPACs.

Rikki: Heightened antitrust and foreign investment scrutiny – more fintech deals means more scrutiny from antitrust regulators, particularly in Europe and the US. With regulators paying closer attention to whether a deal is a ‘killer acquisition’ (including any possible harm to future competition and innovation) and how data could provide a competitive advantage, we think regulators will be interested in the full spectrum of fintech deals – whether the purchaser is an established financial institution, ‘Big Tech’ player or a ‘pure’ fintech.

Another complication is that fintech deals could start to get political – with countries expanding their foreign investment regimes (including the UK’s new national security regime which is now in force), more deals will be subject to foreign investment reviews across the globe. Governments will be particularly interested in understanding the types of sensitive data accessed by fintechs (including personal data), the impact on important financial infrastructure and any unique or cutting-edge capabilities.

Sharon: Data in the competition crosshairs   businesses should expect continued close scrutiny of data-driven theories of harm in 2022, whether in relation to fintech deals or collaboration arrangements, as antitrust regulators around the world continue to probe whether arrangements involving the acquisition or aggregation of data give rise to the creation or strengthening of any perceived competitive advantage and/or any degradation or loss of competition for consumers.

Organic expansion

Andy: Big Tech’s (further) expansion into insurtech – Tesla has offered auto insurance products in California since 2019, and in 2021 expanded this to Texas. It seems unlikely that Tesla’s foray into the auto insurance world will stop there – particularly with its access to real-time driving data for all of its cars allowing highly individualised pricing for products. Amazon has been ever more active in the space, since selling its own-brand protection insurance in 2016, and has now established the Amazon Insurance Accelerator – a digital insurance initiative which has seen Amazon offer business insurance in the US and the UK (through partnerships with underwriters). There are plenty of other examples and it makes perfect sense as these Big Tech companies have the three most important elements to being a successful insurance carrier: (i) access to, and ability to process, a vast amount of data; (ii) an ecosystem that the insurance offerings can be plugged into and sold from (see also our previous post on insurance ecosystems, here); and (iii) brand loyalty (consumers feel safe purchasing insurance from these companies).

George: More full carrier insurtechs – the insurtech space started primarily as insurtechs offering products and add-on services or technology to established insurers. These included tools to help collect and analyse data, customer engagement applications (for example, insurance ‘check-up’ services) and digital claims handling and fraud prevention services. However, the World Insurtech Report notes that ‘full carriers’ are the fastest growing category by volume for insurtechs (and most funded) in both US and Europe – and this trend seems likely to continue. Full carrier insurtechs (for example, Lemonade, Root and Metromile) are benefiting from higher revenue valuation multiples and, it would seem, an acceptance from shareholders/investors that growth and disruption is more important than short-term profits (which is not the case for traditional insurers). Crucial to the ability of insurtechs to become full carriers is access to the reinsurance market for effective risk mitigation strategies (in particular to reduce the amount of regulatory capital needing to be held by the insurtech). As 2022 begins, reinsurers seem willing and available to tap into this growing insurtech space and are supporting this growth.

Eva, Claire: When megatrends collide: ESG x Fintech – ESG will play an increasing role in fintech, with sustainability and technological innovation becoming ever-more interlinked. Fintech solutions offers a real opportunity to enable investors to invest more sustainably. We expect that ESG factors will continue to be a focus for investors, whether that’s by retail investors or institutional investors, or even M&A (or IPOs). We also expect Ethereum to pivot to a 'proof of stake' model in 'the Merge', expected in 2022, which is expected to be much more eco-friendly.  The UK regulators are also looking at the use of technology ('SupTech') in assessing ESG disclosures. We will continue to address topics of interest in our ESG x Fintech crossover series - always available on the TQ blog.

New geographies

Eric: Emerging market spotlight - Vietnam on the move – while Vietnam may have been largely overshadowed by larger Asian markets in the fintech space over recent years, 2021 proved to be a blockbuster year for fintech growth equity deals in the country. 2021 saw a number of notable transactions of all sizes led by top-tier sponsors: digital payments giant VNLife raised USD250m in a Series B round led by General Atlantic and Dragoneer, adding it to the growing list of recently minted Vietnamese unicorns; e-wallet provider Momo raised over USD100m in a Series D round led by Warburg Pincus; and digital banking platform Timo raised USD20m in a financing round led by Square Peg Capital. The drivers of this growth, including Vietnam’s favorable demographics, high mobile device penetration, internet-savvy population and growing middle class, aren’t going anywhere in 2022 so we predict another exciting year for fintech transactions in Vietnam this year. 

Key things to watch in the Vietnam fintech space include:

  • Major regulatory developments – Regulation applicable to fintech businesses is generally trailing the level of innovation on the ground. On the one hand, there is currently no foreign ownership cap on payments businesses, but on the other, a number of laws and regulations dealing with issues such as cybersecurity and personal data protection that could have significant impacts on domestic fintech companies as well as offshore companies that offer services in the domestic market are currently being considered by the government.
  • Offshore listings – No prominent local company has to date successfully executed an offshore listing due to the numerous regulatory, legal and practical hurdles this currently involves. However, a number of tech companies have publicly stated they are aiming to list offshore in the near future. Demonstration of a viable offshore listing strategy would be a game changer and further drive growth in this increasingly important APAC market.


data, fintech, mergers and acquisitions, insurtech, antitrust and competition