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February 7, 2024

Fintech Funding Drops: Most Disastrous 5-Year Performance

The latest Pulse of Fintech report by KPMG has revealed that fintech funding has reached its lowest levels since 2017. Global fintech investment fell to $113.7 billion in 2023, a significant drop from $196.3 billion in 2022. The number of fintech deals also declined to 4,547, marking the lowest level since 2017.

The decline in investment sentiment can be attributed to concerns over high interest rates, geopolitical tensions in Ukraine and the Middle East, declining fintech valuations, and a challenging exit landscape. The report also highlighted that global venture capital (VC) investment in fintech witnessed a significant decline year-over-year, as investors grew more cautious amidst global instability and doubts about valuations and exit opportunities.

The Americas showed the most resilience in terms of fintech investment, with the US accounting for nearly two-thirds of all funding with $78.3 billion over 2,136 transactions. The steepest declines were seen in Asia-Pacific and Europe. Payments remained the top sector by deal volume, while proptech and insurtech were the only subsectors seeing rising investment.

Looking ahead, the report predicts that investment will stay soft in early 2024 before potentially recovering later in the year as interest rates fall. M&A activity may also pick up as investors buy distressed assets. The report also mentioned that AI would play an increasingly significant role in the fintech industry.