The first six months of 2023 have proven difficult for the global fintech market with both total funding and the number of deals dropping – from $63,2-billion across 2 885 deals in H2 2022 to $52,4-billion across 2 153 deals in the first half of 2023, according to KPMG’s latest Pulse of Fintech report.
The cloud of uncertainty permeating the market continued to wear on investors, driven by factors including global macroeconomic concerns (high inflation and rising interest rates), geopolitical tensions (the ongoing conflict between Russia and the Ukraine), and tech sector challenges (depressed valuations and a continued lack of exits). The collapse of several US banks early in 2023 likely also kept many investors in “wait and see” mode during H1 23.
But not all the news was negative. According to the report, a number of sectors attracted robust funding during the first half of 2023. Supply chain and logistics-focused fintechs attracted $8,2-billion in funding – well above the space’s 2019 annual record of $5,5-billion. Green fintech also had robust interest, with $1,7-billion of funding – already slightly ahead of its 2022 results ($1,5-billion).
At a regional level, the Americas saw fintech funding grow – from $28,9-billion to $36,1-billion between H2 22 and H1 23 – despite a decline in deals volume from 1 323 to 1 011 deals over the same timeframe. In the EMEA region, fintech funding dropped by more than 50%, falling from $27,3-billion across 963 deals in H2 22 to $11,2-billion across 702 deals in H1 23. Fintech funding also dropped in the ASPAC region – from $6,8-billion across 583 deals in H2 22 to $5,1-billion across 432 deals in H1 23.
“It wasn’t a surprise to see fintech funding decline in the first six months of 2023 given the enormous headwinds pressuring the market at the moment,” says Judd Caplain, global head of Financial Services at KPMG. “But the long-term business case for many subsectors within fintech remains very strong – particularly for sectors like payments, insurtech, and wealthtech. Once market conditions begin to even out, funding will likely rebound, if not to the record level experienced in 2021.”
Key highlights from the Pulse of Fintech report include:
* Global funding in fintech dropped from $63,2-billion across 2 885 deals in H2 22 to $52,4-billion across 2 153 deals in H1 23.
* The Americas attracted $36,1-billion in fintech funding across 1 011 deals in H1 23 – of which the US accounted for $34,9-billion across 809 deals. The EMEA region attracted $11,1-billion across 702 deals, while the ASPAC region attracted $5,1-billion across 432 deals.
* Global VC funding declined from $28,3-billion in H2 22 to $27,3-billion in H123. The Americas attracted $16-billion in funding during H1 23 – of which the US accounted for $15,1-billion, while
EMEA attracted $6,6-billion in VC funding, and the ASPAC region saw $4,6-billion.
* Global M&A activity was quite soft in H1 23, with only $24-billion in deal value, including $19,3-billion in the Americas ($19,2-billion in the US), $4,3-billion in the EMEA region, and $460-million in the ASPAC region.
* Global PE funding was also very soft with $1,1-billion in funding in H1 23, including $768-million in the Americas ($627-million in the US), $279,5-million in the EMEA region, and $60,5-million in the ASPAC region.
* Corporate-participating funding accounted for $16,7-billion in funding during H1 23, including $10,8-billion in the Americas ($10,4-billion in the US), $3,1-billion in the ASPAC region, and $2,7-billion in the EMEA region.
* Payments accounted for $16,2-billion of funding in H1 23, while artificial intelligence and machine learning focused fintech attracted $8,8-billion, supply chain and logistics focused fintech attracted $8,2-billion, and insurtech attracted $4,7-billion.