Fintech investments dropped to lowest level since 2017 — KPMG H2 2023 report

In 2023 the total fintech investments decreased to $113.7 billion globally and the number of fintech deals reached 4,547. The numbers are the lowest level since 2017. Fintech investors became more cautious with their investments due to the high interest rate environment and stubbornly high inflation in many fields.

KPMG has prepared a new Pulse of Fintech report about global fintech market in 2023. AIN shares the key findings of the report.

Fintech scene in H2 2023

• The decline in fintech investment across all key regions in 2023 with ASPAC experiencing the largest drop — from $51.3 billion in 2022 to just $10.8 billion in 2023.
• The EMEA region saw investment fall from $49.6 billion to $24.5 billion. The USA showed the most resilience, with fintech investment dropping from $95.4 billion in 2022 to $78.3 billion in 2023.
• Despite general downturn, some sectors experienced slight growth:
  • the payment space continued to account for the largest share of fintech funding, despite a drop from $57.9 billion to $20.7 billion between 2022 and 2023.
  • proptech investment rising from $4.1 billion to $13.4 billion;
  • insurtech investment growing from $5.9 billion to $8.1 billion;
  • ESG sector experienced $2.3 billion of investments in 2023, which is the second largest figure in history.
• Among those fintech segments which experienced a slight drop are regtech (fell to $2.6 billion), cybersecurity ($1.3 billion in 2023), wealthtech (fell to under $200 million), blockchain/cryptocurrency (less than $8 billion).
• $12.1 billion of investments were in AI-based fintech companies. Although, there was a drop in funding compared to the previous $28.1 billion in 2022, interest in the field of AI remains relatively high. Many financial institutions and fintech companies are adopting AI through alliances and product spending rather than direct investment.

Key summaries on the fintech sector over H2 2023:

• Increased scrutiny of potential fintech deals, including a very strong focus on profitability and avoidance of down rounds.
• ­Focus on B2B fintech solutions aimed at enablement rather than on B2C-focused business models.
• ­Using of AI and generative AI across the fintech sector.
• ­Embedded financial products, particularly payments and lending, as part of transition to opening banking.

In 2024, investment in the fintech is expected to remain relatively mild, although the overall investment is expected to rise. Within the fintech startup scene, funding at the seed and pre-seed stages is holding steady, despite smaller deal sizes as investors diversify their portfolios.

About KPMG

KPMG is a a global network of professionals who deliver meaningful results through a deep understanding of the issues and operations of the public sector. It offers professional services to businesses across the globe, occasionally publishing free market reports like Pulse of Fintech.