Total global investment in regtech was very strong in 2021, with a record number of deals driving almost $10 billion in investment — just shy of 2020’s record high. While H1’21 included the $2.7 billion acquisition of Canadian-based Verafin and the $600 million buyout of Ireland-based Fenergo, H2’21 results were driven primarily by late stage VC deals, including a $500 million raise by Carta, a $425 million raise by Deel and a $153 million raise by Quantexa.

What to watch for in Q2’21

• Continued investment in regtech solutions across a broad range of subsectors, including privacy, fraud prevention and detection, cryptocurrencies, and HR management
• The emergence of regtech firms outside of the traditional US and UK hubs
• Growing focus on regtech focused on Europe’s Whistleblower Directive, Capital Requirements Regulation 3, and new stress testing requirements related to climate risk.
• Increasing investment in the US following the release of its Strategy on Countering Corruption in December 2021
• Regulators continuing to support the evolution of regtech solutions

Both global investment and the number of wealthtech deals reached new highs in 2021, largely driven by increasing VC investment. After an H1’21 characterized by several large VC raises (e.g., Canada-based Wealthsimple - $600 million, US-based CleanCapital — $325 million) and the $989 million acquisition of UK-based Nutmeg by JP Morgan, H2’21, saw more moderate deal sizes, including $125 million and $104 raises by Germany-based wealthtechs Moonfare and Liquid.  A number of acquisitions were also announced during H2’21.

What to watch for in Q2’21

• Established financial institutions looking to drive more value by including asset management and wealth distribution under their existing banking license
• More M&A activity as corporates look to play catch-up and smaller wealthtechs consolidate
• Growth in global financial institutions looking to acquire regional wealthtech players in order to bolt-on and globalize their wealth tech offerings

Interest in cybersecurity skyrocketed in 2021, driven by disruptions that gained international attention, including major ransomware attacks and the use of exploitable malware on non-traditional IT infrastructure. Between 2020 and 2021, investment in cybersecurity more than doubled, although the $2.7 billion acquisition of Verafin in H2’21 accounted for more than half of this total. H2’21 saw a combination of M&A and VC investment in the space, including a $310 million raise by US-based Fireblocks, the $250 million merger between Switzerland-based zero knowledge rollup blockchain company Hermez and India-based crypto company Polygon, and the acquisition of Israel-based cybersecurity firm GK8 by Celsius Network.

What to watch for in Q2’21

• An increasing focus on the use of AI, machine learning, and automation
• Increasing M&A activity as boutique cybersecurity firms get acquired by bigger providers looking to gain scale and breadth
• Growing focus on platform-based approaches to cybersecurity
• Increasing corporate investment, particularly in regulated sectors like banking
• Continued focus on fraud detection and anti-money laundering in the payments space

Global investment in blockchain and cryptocurrencies soared past $30 million in 2021 — shattering the previous high of $8.2 billion set in 2018 and rising more than five times compared to the $5.5 billion in investment seen in 2020.

What to watch for in Q2’21

• An increase in crypto firms taking the initiative to provide transparency related to what backs their asset in order to drive adoption
• Increasing collaboration between crypto firms and regulators in order to introduce necessary regulations for the space
• Continued volatility related to different cryptocurrencies as markets continue to evolve and get tested
• Increasing interest from investors of all types — from individuals to institutional investors and corporates
• Increasing consideration of how blockchain and crypto will help enable Web 3.0