Global Fintech Investment Dips to Five-Year Low in 2023
Global fintech investment falls to $113.7 billion in 2023, lowest point in five years
Decline attributed to concerns over high interest rates, geopolitical tensions, and challenging exit landscape
Investment sentiment cooling significantly across all key regions
The latest Pulse of Fintech report by KPMG highlighted a significant downturn in fintech investment in 2023, with global funding reaching its lowest point in five years. Fintech investment totaled $113.7 billion through 4,547 transactions, marking a notable drop from the previous year’s $196.3 billion. This decline can be attributed to concerns over high interest rates, geopolitical tensions, declining fintech valuations, and a challenging exit landscape. Anton Ruddenklau, the Global Head of Fintech and Innovation at KPMG, commented that 2023 was a difficult year for the fintech market globally, with declines seen across all regions.
Uptick in Global Fintech Investment Reversed in Second Half of 2023
Global fintech investment increases slightly between H1 and H2 2023, with six blockbuster deals driving growth
Acquisition of Black Knight by Intercontinental Exchange and other notable transactions
Separate report highlights positive trend in fintech funding in the United Arab Emirates
Despite the overall decline in global fintech investment in 2023, there was a slight uptick in the second half of the year. Investment climbed from $55.5 billion in H1 to $58.2 billion in H2, fueled by six blockbuster deals exceeding $1 billion each. Notable transactions included the acquisition of US-based Black Knight by Intercontinental Exchange for $11.7 billion, the acquisition of US-based Adenza by Nasdaq for $10.5 billion, and a private equity raise of $6.9 billion by UK-based Finastra. Additionally, a separate report from Innovate Finance highlighted a positive trend in fintech funding in the United Arab Emirates, with funding nearly doubling and growing by 92%.
Asia-Pacific and Europe Experience Steepest Declines in Fintech Investment
Steepest declines in fintech investment seen in Asia-Pacific and Europe
Investment in Americas shows the most resilience with an 18% year-over-year decline
United States remains a leader in fintech funding, accounting for nearly two-thirds of all investment
The drop in global fintech investment in 2023 occurred across all major regions, with Asia-Pacific and Europe experiencing the steepest declines. Investment in the Americas showed more resilience but still fell by 18% year-over-year. The United States remained a leader in fintech funding, accounting for nearly two-thirds of all investment. In total, the US secured $78.3 billion over 2,136 transactions.
Payments Sector Takes a Hit, Proptech and Insurtech Show Promise
Payments sector remains top sector by deal volume, despite a 64% drop in funding
Proptech and insurtech are rare bright spots, seeing increased investment
AI and embedded finance attract interest from fintech investors
While the overall fintech investment declined in 2023, there were noticeable trends within specific sectors. The payments sector remained the top sector by deal volume, although funding dropped by 64% to $20.7 billion. On the other hand, proptech and insurtech were rare bright spots, with rising investment observed in these subsectors. Fintech investors also showed interest in AI and embedded finance as they increasingly focused on profitability and sustainability while shunning risky bets.
Global Venture Capital Investment in Fintech Plummets in 2023
Global venture capital investment in fintech experiences significant decline year-over-year
Total VC investment drops from $88.8 billion in 2022 to $46.3 billion in 2023
Later-stage deals see drastic decrease in investment
Global venture capital investment in fintech witnessed a substantial decline in 2023, both compared to the previous year and between the first and second halves of the year. The total VC investment plummeted from $88.8 billion in 2022 to $46.3 billion in 2023, marking a significant decrease. Similarly, the VC investment between H1 ($27.5 billion) and H2 ($18.8 billion) also experienced a sharp drop. Notably, investment in later-stage deals decreased drastically from $37.4 billion in 2022 to $14.1 billion in 2023. Fintech investors grew more cautious amidst global instability, inflation concerns, and doubts about valuations and exit opportunities.
Mixed Forecasts for Fintech Investment in 2024
Investment expected to remain soft in early 2024 before potential recovery later in the year
M&A activity may pick up as investors buy distressed assets
Record highs in seed and early-stage funding indicate continued interest in testing new fintech models
Looking ahead, investment in the fintech sector is expected to remain soft in early 2024 before a potential recovery later in the year if interest rates fall. M&A activity may also pick up as investors take advantage of distressed assets. The report highlighted an outlier to the declining investment trends, with seed and early-stage funding hitting record highs in terms of deal numbers. This suggests that investors are still keen to test new fintech models. Additionally, the report mentioned that AI would play an increasingly significant role in the fintech industry, reflecting the growing importance of technology in shaping the future of finance.
Analyst comment
Heading 1: Negative
As an analyst, the market is likely to continue to face challenges in the near future due to concerns over high interest rates, geopolitical tensions, and a challenging exit landscape. Investor sentiment is cooling significantly across all regions, indicating a potential slowdown in fintech investment.
Heading 2: Neutral
The slight uptick in global fintech investment in the second half of 2023 suggests some stability, but the overall decline in investment remains a concern. The six blockbuster deals and positive trend in fintech funding in the United Arab Emirates provide a glimmer of hope, but sustained growth may be uncertain.
Heading 3: Negative
The steepest declines in fintech investment in Asia-Pacific and Europe highlight a challenging market environment. While the Americas show more resilience with a smaller decline, the overall drop in global investment across all regions signifies potential difficulties for the market. The United States remains a leader in fintech funding, but uncertainties persist.
Heading 4: Mixed
The payments sector faces a significant hit with a drop in funding, but proptech and insurtech show promise with increased investment. The interest in AI and embedded finance indicates potential growth opportunities. Overall, the sector experiences mixed trends, with some areas of strength and others facing challenges.
Heading 5: Negative
The significant decline in global venture capital investment in fintech raises concerns about the health of the market. The decrease in later-stage deals indicates caution among investors amidst global instability and doubts about valuations and exit opportunities. The decline in both total VC investment and investment between H1 and H2 raises uncertainties.
Heading 6: Mixed
The forecast for fintech investment in 2024 is mixed, with a potential softness in the early part of the year before a potential recovery later on. M&A activity may pick up as investors look for distressed assets. The record highs in seed and early-stage funding suggest continued interest in testing new fintech models, but market conditions and interest rates will play
