The second half of 2022 was particularly challenging for the fintech sector globally amidst a combination of challenging economic conditions like high inflation and interest rates and specific market challenges like the lack of IPOs and exit opportunities, continued downward pressure on valuations and margin pressures for companies in areas like buy now, pay later. With little sign that the challenging market conditions will begin to alleviate as we head into H1’23, fintech investment is expected to remain relatively subdued, even compared to H2’22 — although a number of fintech subsectors are expected to be more resilient than others. Here are our top predictions for fintech in H1’23:
Here are the top fintech trends for H1’23:
01
M&A deal sizes will be relatively smaller: With valuations expected to remain relatively unstable in H1’23, the likelihood of mega-M&A transactions — $10 billion+ in deal value — will be relatively low. M&A activity in general could increase as valuations stabilize and corporates or large fintechs with deep pockets look for the opportunity to pick up companies at good prices.
02
B2B solutions will continue to attract solid investment: With many companies, both with the financial services sector and beyond, focusing on cutting costs and driving more customer value, B2B solutions will remain a key priority for investment.
03
Interest in non-crypto blockchain-based solutions will grow: As investors pull back to re-evaluate their approaches to making investments in crypto, other areas of blockchain innovation will see growing interest — such as cross-border payments solutions, gaming and NFTs.
04
AI-driven fintech solutions will gain more attention from investors: There will be growing interest in AI-driven fintech solutions, particularly in areas like AI-based data analytics, real-time risk assessment, and customer engagement.
05
Regulators will put more scrutiny on the crypto space: Given events of 2022, regulators around the world will likely put more scrutiny on companies and activities in the crypto space.
06
ESG-focused fintechs will see growth: With climate change a major priority for governments, businesses and consumers, interest and investment in fintech solutions aligned to ESG will likely grow considerably. Investments could be quite diverse, from financing platforms for renewable energy projects to ESG-focused regtech solutions.
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Key Contact
Anton Ruddenklau
Global Head of Financial Services Innovation and Fintech, KPMG International
Key Contact
Judd Caplain
Global Head of Financial Services, KPMG International
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