Anton Ruddenklau & Karim Haji
Highlights:
- Americas accounts for nearly 70% of total global fintech funding, attracting US$78.3 billion in 2023
- Global VC investment in fintech falls more than 50%, from US$88.8 billion in 2022 to US$46.3 billion in 2023
2023 was a challenging year for the fintech market, with total global fintech investment dropping from US$196.6 billion across 7,515 deals in 2022 to a six-year low of US$113.7 billion across 4,547 deals in 2023 according to the Pulse of Fintech H2’23—a bi-annual report published by KPMG highlighting global fintech investment trends. Conflicts in Ukraine and the Middle East, the high interest rate environment, and the barren exit environment across regions saw fintech investors holding onto their cash throughout much of the year.
The second half of 2023 showed a marginal gain over the first half, with total fintech investment rising from US$55.5 billion in H1’23 to US$58.2 billion in H2’23. Six $1 billion+ deals contributed significantly to this result, including the US$11.7 billion acquisition of US-based Black Knight by Intercontinental Exchange, the US$10.5 billion acquisition of US-based Adenza by Nasdaq, a US$6.9 billion PE raise by UK-based Finastra, the US$1.2 billion buyout of US-based Avantax by Cetera, the $1 billion VC raise by California-based Generate, and the US$1 billion acquisition of Brazil-based Pismo by Visa. VC investment was not so fortunate — dropping from US$27.5 billion to US$18.8 billion between H1’23 and H2’23.
Regionally, the Americas accounted for nearly 70% of total fintech funding in 2023, accounting for $78.3 billion across 2,136 deals. The US accounted for the lion’s share of this investment ($73.5 billion). Comparatively, the EMEA region saw $24.5 billion of total fintech investment across 1,514 deals, while the ASPAC region saw $10.8 billion across 882 deals. At a sector level, the payments space attracted the largest share of fintech investment globally ($20.7 billion)—although it was a major drop from the $58 billion seen in 2022. By comparison, proptech and ESG were very hot with investors; proptech investment reached a record high of $13.4 billion in 2023, while ESG-focused fintech investment rose from $1.2 billion to $2.3 billion year-over-year.
” The fintech market floundered somewhat in 2023, buffeted by many of the same issues challenging the broader investment climate. While there were still good deals to be had, investors were definitely sharpening their pencils—enhancing their focus on profitability.
While it was a depressed year for the fintech market overall, there were a few particularly bright lights. Proptech, ESG fintech, and investors embraced AI-focused fintechs—which helped particularly in the last six months.”
Anton Ruddenklau
Global Head Fintech and Innovation, Financial Services, KPMG International
2023—Key Highlights
- Global fintech investment was US$113.7 billion across 4,547 deals in 2023 – down from US$$196.6 billion across 7,515 deals in 2022.
- The Americas attracted US$78.3 billion across 2,136 deals in 2023—of which the US accounted for US$73.5 billion across 1,734 deals—while the EMEA region attracted US$24.5 billion across 1,514 deals, and the ASPAC region attracted US$10.8 billion across 882 deals.
- Global M&A deal value dropped from US$98.2 billion in 2022 to US$56.4 billion in 2023; global VC investment declined from US$88.8 billion to US$46.3 billion year-over-year. PE growth investment showed the most resilience, up from US$9.6 billion in 2022 to US$11 billion in 2023.
- Payments remained the strongest area of fintech investment globally in 2023, with US$20.7 billion in investment compared to US$58 billion in 2022; 2023 investment in other notable sectors included proptech (US$13.4 billion), insurtech ($8.1 billion), crypto and blockchain (US$7.5 billion), regtech (US$2.6 billion), ESG fintech (US$2.3 billion), and cybersecurity (US$1.3 billion)
- Corporate-participating VC investment globally fell from US$45.9 billion in 2022 to US$25.2 billion in 2023.
Second best year for ESG fintech investment
2023 was the second-best year for fintech investment on record, with the $2.3 billion in investment second only to 2021’s peak high of $3.7 billion. The US accounted for the largest deals in this space in 2023, including $1.1 billion deal by sustainable infrastructure startup Generate, a $1 billion PE raise by carbon custody platform Rubicon Carbon, a $525 million VC raise by environmental commodities firm Xpansiv, and a $500 million raise by cleantech investment firm CleanCapital. The combination of ongoing regulatory changes and the ambitious net zero commitments by both governments and businesses will likely keep investment in ESG-focused fintech solutions on a positive trend heading into 2024.
Artificial intelligence a key priority for investors
Interest in AI gathered a lot of steam across the investment market over the course of 2023, and the fintech market was no exception. AI-driven fintech companies accounted for $12.1 billion in investment in 2023. While this reflects a significant decline in funding compared to the US$28.1 billion seen in 2022, the decline in investment does not reflect any lessening of interest in the space; during 2023, many financial institutions and fintechs chose to embrace AI through alliances and product spend rather than through direct investment.
US accounts for US$73.5 billion of the US$78.3 billion in fintech funding seen in Americas
Total annual fintech investment in the Americas fell from $95.4 billion across 3,467 deals in 2022 to US$78.3 billion across 2,136 deals in 2023. The US attracted the vast majority of fintech deals activity during the year, accounting for US$73.5 billion of investment across 1,734 deals. Brazil attracted US$2.6 billion across 111 deals, while Canada saw US$920 million across 109 deals. VC investment fell sharply in the region, dropping from US$44.7 billion to $26.6 billion year-over-year. Corporates participated in $15.1 billion of these deals.
The second half of 2023 was particularly weak for the fintech market in the Americas—with $38.4 billion of investment across 916 deals in H2’23. The US accounted for $35 billions of this investment.
EMEA region sees investment in fintech drop to a seven-year low of $24.5 billion in 2023
Fintech investment in the EMEA region plummeted to US$24.5 billion across 1,514 deals in 2023 from US$49.6 billion across 2,478 deals in 2022. H2’23 saw an increase in investment over the first half of the year, accounting for US$16.3 billion compared to US$8.2 billion. The US$6.9 billion PE raise by UK-based Finastra accounted for over half of this funding, however.
H2’23 showcased the geographic diversity of the EMEA region’s fintech market, with fintechs from seven different countries represented in the region’s top ten deals. In addition to the UK’s, Sweden (Macrobond Financial – $763.8 million), the Netherlands (PayU – $610 million), Italy (Banco BPM – $548.9 million), the United Arab Emirates (Tabby – $950 million, Haqqex – $400 million), Finland (Nomentia – $385.1 million), and Spain (Gestión Tributaria Territorial – $325.7 million) all attracted large fintech deals.
Fintech investment in the Asia-Pacific region falls by more than 75%
It was an incredibly soft year for fintech investment in the ASPAC region, with only US$10.8 billion of investment across 882 deals in 2023—down from US$51.3 billion in investment in 2022—although the 2022 numbers were buoyed by the US$29 billion acquisition of Australia-based Afterpay. Fintech investment in India was particularly soft, falling from US$6.8 billion to US$3 billion between 2022 and 2023, although investment also dropped in Singapore—from US$4.5 billion to US$2.2 billion. Fintech investment in China rose year-over-year—from a ten-year low of US$800 million to US$1.9 billion. VC investment in the ASPAC region dropped from US$15.4 billion in 2022 to US$7.8 billion in 2023. Of this, corporates participated in US$4.1 billion of deals.
H2’23 was slightly slower in ASPAC, with fintechs attracting $3.4 billion in investment. VC raises accounted for the vast majority of investment in H2’23, including by Hong Kong (SAR), China-based Micro Connect (US$458 million) and Singapore-based boltech ($246 million)), India-based Perfios (US$229 million), and Japan-based Gojo & Company (US$110.6 million).
Fintech investment expected to remain soft into H1’24
Given the ongoing global conflicts, the high interest rate environment, and the continued lack of exits, global fintech investment is expected to remain soft heading into the first quarter of 2024. As interest rates stabilize and possibly begin to decline, investment could begin to pick up. AI and B2B solutions will likely remain big tickets for investors. M&A activity could also start to rebound as investors more seriously look at distressed assets.
” The fintech market has been evolving and maturing since it got its start in 2004 and really came into its own in 2008. The technology underpinning fintech keeps changing—and right now, we’re seeing it change again with the application of AI and generative AI.
You could say that we’re coming into the next wave of fintech. While the investment numbers are soft now—due to broader market conditions—the next year could be quite exciting for innovation in the fintech space.”
Karim Haji
Global Head of Financial Services, KPMG International
Anton Ruddenklau
Global Head of Financial Services Innovation and Fintech
KPMG International
Karim Haji
Global Head of Financial Services, KPMG International, Head of Financial Services, KPMG in the UK
KPMG International
This article was republished under the Creative Commons licence.