The first
half of 2023 was a tough time for the global fintech market, most notably
for the European fintech industry, which saw funding shrink by more than half
compared to the preceding period. This coincides with an overall decrease in
global fintech funding, highlighting the adverse effects of various
geopolitical and macroeconomic challenges for the sector.
In H2 2022,
fintech funding stood at $63.2 billion across 2,885 deals. However, H1 2023
experienced a plunge falling to $52.4 billion across 2,153 deals, according to the Pulse of Fintech report produced by KPMG. These figures indicate a significant
contraction in total funding and deal volume.
Conversely,
the Americas demonstrated resilience, increasing fintech funding from $28.9
billion to $36.1 billion, despite a drop in deal volume. On the other hand, the EMEA region experienced the most substantial dip, with funding plummeting over 50%,
from $27.3 billion across 963 deals in H2 2022 to $11.2 billion across 702
deals in H1 2023. The APAC region also witnessed a downward trend, with fintech
funding decreasing from $6.8 billion across 583 deals to $5.1 billion across
432 deals.
Rising
interest rates, high inflation, geopolitical tension, and tech sector
devaluation all contributed to this pervasive uncertainty in the market. The
collapse of several US banks in early 2023 likely further fueled this investor’s
hesitance.
“The
entire tech sector is experiencing fierce headwinds at the moment — and fintech
is no different,” Judd Caplain, the Global Head of Financial Services at KPMG
International, commented. “The combination of macroeconomic forces like
high inflation and rapidly rising interest rates, combined with
fintech-specific challenges saw investors being a lot more conservative with
their funding.”
This data
is confirmed by another report published in early July by Innovative Finance.
According to the company’s calculations, the total capital investment of $27.3
billion across 1,714 deals marks a drop of 14% from H2 2022. Globally, funding in the financial technology sector slid by 30% to $95 billion during this year.
In other
regions of the world, fintech is doing well. Investment directed to
the fintech sector in the Association of Southeast Asian Nations (ASEAN) rose
to $4.3 billion in the first nine months of 2022. This amount is higher than
the total investment in the sector between 2018 and 2020.
Sectors Bucking the Trend
Despite the
general downturn, certain sectors showed promise. “Funding influx was
witnessed in supply chain and logistics-focused fintechs, and green fintech,
with $8.2 billion and $1.7 billion, respectively in H1 2023. These figures
surpassed their previous records,” Caplain added.
Despite the
current financial headwinds, the long-term business cases for many fintech
subsectors remain strong. Sectors like payments , insurtech, and wealthtech are
expected to bounce back once market conditions stabilize.
However,
the future of fintech funding is unpredictable due to ongoing geopolitical and
macroeconomic uncertainties. KPMG suggests that artificial intelligence,
particularly generative AI, may become a prospective area to buck the trend.
“Generative
AI is drawing considerable interest and funding, especially in areas like
cybersecurity, regtech, and wealthtech. As corporations seek to leverage
generative AI effectively, we anticipate an uptick in investor interest in the
coming months,” Anton Ruddenklau, the Global Fintech Leader at KPMG, concluded.
The first
half of 2023 was a tough time for the global fintech market, most notably
for the European fintech industry, which saw funding shrink by more than half
compared to the preceding period. This coincides with an overall decrease in
global fintech funding, highlighting the adverse effects of various
geopolitical and macroeconomic challenges for the sector.
In H2 2022,
fintech funding stood at $63.2 billion across 2,885 deals. However, H1 2023
experienced a plunge falling to $52.4 billion across 2,153 deals, according to the Pulse of Fintech report produced by KPMG. These figures indicate a significant
contraction in total funding and deal volume.
Conversely,
the Americas demonstrated resilience, increasing fintech funding from $28.9
billion to $36.1 billion, despite a drop in deal volume. On the other hand, the EMEA region experienced the most substantial dip, with funding plummeting over 50%,
from $27.3 billion across 963 deals in H2 2022 to $11.2 billion across 702
deals in H1 2023. The APAC region also witnessed a downward trend, with fintech
funding decreasing from $6.8 billion across 583 deals to $5.1 billion across
432 deals.
Rising
interest rates, high inflation, geopolitical tension, and tech sector
devaluation all contributed to this pervasive uncertainty in the market. The
collapse of several US banks in early 2023 likely further fueled this investor’s
hesitance.
“The
entire tech sector is experiencing fierce headwinds at the moment — and fintech
is no different,” Judd Caplain, the Global Head of Financial Services at KPMG
International, commented. “The combination of macroeconomic forces like
high inflation and rapidly rising interest rates, combined with
fintech-specific challenges saw investors being a lot more conservative with
their funding.”
This data
is confirmed by another report published in early July by Innovative Finance.
According to the company’s calculations, the total capital investment of $27.3
billion across 1,714 deals marks a drop of 14% from H2 2022. Globally, funding in the financial technology sector slid by 30% to $95 billion during this year.
In other
regions of the world, fintech is doing well. Investment directed to
the fintech sector in the Association of Southeast Asian Nations (ASEAN) rose
to $4.3 billion in the first nine months of 2022. This amount is higher than
the total investment in the sector between 2018 and 2020.
Sectors Bucking the Trend
Despite the
general downturn, certain sectors showed promise. “Funding influx was
witnessed in supply chain and logistics-focused fintechs, and green fintech,
with $8.2 billion and $1.7 billion, respectively in H1 2023. These figures
surpassed their previous records,” Caplain added.
Despite the
current financial headwinds, the long-term business cases for many fintech
subsectors remain strong. Sectors like payments , insurtech, and wealthtech are
expected to bounce back once market conditions stabilize.
However,
the future of fintech funding is unpredictable due to ongoing geopolitical and
macroeconomic uncertainties. KPMG suggests that artificial intelligence,
particularly generative AI, may become a prospective area to buck the trend.
“Generative
AI is drawing considerable interest and funding, especially in areas like
cybersecurity, regtech, and wealthtech. As corporations seek to leverage
generative AI effectively, we anticipate an uptick in investor interest in the
coming months,” Anton Ruddenklau, the Global Fintech Leader at KPMG, concluded.
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- Source: https://www.financemagnates.com//fintech/fintech-in-distress-emea-sector-faces-major-funding-crunch-in-h1-2023/
