The first six months of 2024 were challenging for the fintech market globally amid the high interest rate environment and the significant amount of global geopolitical uncertainty.
Total global fintech investment – including VC, PE, and M&A deal value – fell from $62,3-billion across 2 287 deals in H2 2023 to $51,9-billion across 2 255 deals in H1 2024. VC investment declined in all key regions: while the US and ASPAC saw modest declines between H2 2023 and H1 2024 – from $38,5-billion to $36,7-billion in the Americas and from $4,6-billion to $3,7-billion in ASPAC – the EMEA region saw a more significant drop from $19,1-billion to $11,4-billion.
The decline in deal value was partly due to the decline in large deals as fintech investors showed significant caution with their investments. According to the H1 2024 edition of KPMG’s Pulse of Fintech – during the six-month period, only five $1-billion+ fintech deals occurred globally, including the buyouts of US-based Worldpay for $12,5-billion, Canada-based Nuvei for $6,3-billion, US-based EngageSmart for $4-billion, UK-based IRIS Software Group for $4-billion, and Canada-based Plusgrade for $1-billion. The largest VC deal globally in the fintech space was a $999 million raise by UK-based Abound.
Despite the decline in total investment, regional deal volume provided a hint of optimism. While deal volume globally dipped slightly, the decline was driven entirely by a decline in deal volume in EMEA – from 804 in H2 2023 to 689 in H1 2024. Comparatively, the Americas saw deal volume rise from 1 066 to 1 123, while ASPAC saw it rise from 406 to 438.
“The high cost of capital and geopolitical uncertainty linked to conflict and elections have put a significant damper on all global investments so far this year – and the fintech market isn’t immune to that,” says Karim Haji, global head of Financial Services, KPMG International. “Investors are acting cautiously, not only when it comes to large transactions, particularly on the M&A front, given concerns about valuations and the profitability of potential targets, investors are focused on improving the companies they already own rather than buying new.”
Other highlights from the report include:
Interest in AI heating up in fintech space
Mirroring a trend seen globally, AI was quite hot in the eyes of fintech investors in H1’24, particularly in the Americas. The US in particular saw four large AI-focused deals: cyber insurance company Corvus was acquired by Travellers for $427-million; compensation-focused platform Spiff was acquired by Salesforce for $419-million; corporate management company Ramp raised a $150-million VC round; and investment management platform FundGuard raised a $100-million VC funding round. China-based AI-powered sustainability data company MioTech also raised a $150-million VC round in H1’24.
After a slow 2023, investment in payments and regtech rebound
After a very quiet year of investment in 2023, both the payments sector and the regtech sector saw VC investment rebound quite solidly in H1’24. The payments space attracted $21,4-billion in investment during H1’24, compared to the $22,7-billion seen during all of 2023, while regtech attracted $5,3-billion in investment, compared to just $3,4-billion during all of 2023. Meanwhile, insurtech investment dried up significantly in H1’24 – attracting $1,6-billion in investment – less than one-quarter of the $8,2-billion seen in 2023.
Americas sees small drop in fintech investment; number of deals rises
Fintech investment in the Americas was $36,7-billion in H1’24 – down slightly compared to the $38,5-billion in H2’23. The US accounted for $27,4-billion of this investment, including the $12,5-billion acquisition of Worldpay by GTCR, the $4-billion buyout of B2B customer engagement platform EngageSmart by Vista Equity Partners, the $930-million acquisition of financial research firm Tegas by AlphaSense, and the $685-million VC raise by capital markets platform company Clear Street.
Fintech investment in Canada reached a record high of $7,8-billion for a six-month period in H1’24, driven by the $6,3-billion acquisition of payments firm Nuvei by Advent International and the $1-billion buyout of revenue solutions firm Plusgrade by General Atlantic. Meanwhile, Brazil had a quiet quarter of fintech investment attracting just $616-billion in H1’24 compared to $1,8-billion in H2’23.
ASPAC region sees slowest quarter of investment since Q3’17
Fintech investment in the ASPAC region fell from $4,6-billion in H2’23 to $3,7-billion in H1’24. Much smaller deal sizes accounted for the decline, with a $280-million VC raise by China-based capital markets solutions firm Yi’an Enterprise accounting for the largest deal of the quarter, followed by a $209-million VC raise by India-based personal loan platform KreditBee, a $195-million VC raise by Thailand-based digital financial solutions firm Ascend, and $150-million VC raises by China-based ESG financial solutions firm MioTech and Australia-based performance management firm Camms.
EMEA region sees 40% drop in fintech funding
Fintech funding in the EMEA region fell 40% from $19-billion in H2’23 to just $11,4-billion in H1’24. Continued geopolitical uncertainty including elections in the EU, UK, and France, combined with the high interest rate environment kept investment quite subdued. The UK accounted for the largest share of fintech investment in the EMEA region ($7,3-billion), including the $4-billion buyout of financial software company IRIS Software Group by Leonard Green, the $999-million VC raise by SMB marketplace platform Abound, and a $621-million raise by neobank Monzo. Outside of the UK, the largest deals included the buyout of Italy-based payments firm Banco BPM Gruppo for $652-million and the acquisition of Switzerland based e-invoicing company Pagero by Thomson Reuters.
Early stage deals provide most optimism heading into H2’24
Fintech investment is expected to remain subdued in H2’24 given the high interest rate environment and resulting high cost of capital, in addition to the approach of the US presidential election. AI will likely be the hottest area of investment as startups work to tailor AI solutions specifically to the financial services sector. There is some optimism that deal volume will continue to increase, but average deal sizes will likely remain small compared to historical norms.
“The reality is that the overall investment total for the first half of the year was buoyed by a handful of large deals, several of which were take privates aimed at avoiding significant or further valuation loss,” says Anton Ruddenklau, global head of Financial Services Fintech and Innovation. “Meanwhile, the volume of early-stage deals has been thriving both because of the interest in new technologies such as AI applications, and newer business models to meet the changing nature of the financial services sector. The rise of ‘platforms’ continues to gain momentum as decentralisation, data aggregation and ecosystem connectivity becomes mainstream.”