Pulse of Fintech H1/23: Financing down significantly in the first half of 2023

The first six months of 2023 were not easy for the global fintech market. Some challenges were to be expected: high inflation, rising interest rates, the consequences of Russia's invasion of Ukraine, as well as declining valuations and a lack of exit opportunities. In addition, there were surprising challenges, including the US banking crisis.

Financing across the fintech industry fell to $52.4 billion in the first half of 2023 - down $10.8 billion from the second half of last year. The number of global fintech deals fell by 732 to 2,153 deals in the period. The EMEA (Europe, Middle East and Africa) and Asia-Pacific regions were particularly affected by the market turmoil and slowdown in funding activity. Meanwhile, the fintech industry in the Americas saw an increase in funding to $36 billion - up from $28.9 billion in the second half of 2022.

Several sub-sectors of the industry registered high funding levels in the first half of this year: At $8.2 billion, mid-year funding for fintech companies with a focus on logistics and supply chain financing was well above the previous year's levels. For ESG-focused fintechs, mid-year funding levels already exceeded the 2022 total at $1.7 billion.

These are the main trends we have seen in the industry over the last six months:

• Increased focus on operational efficiency, sustainable cash flows and profitability - both among investors and fintechs with the aim of deferring the next rounds of financing
• nsustained resilience in payments, especially in payments infrastructure.
• Declining crypto funding following difficulties in the industry and increased focus on broader blockchain solutions
• Rapidly growing interest in potential use cases for generative AI, particularly in cybersecurity, insurtech and wealthtech

Our experts predict that the difficulties in the market will continue and that activity in the fintech sector will remain subdued. As the market gradually stabilises, financing is expected to increase - especially in the payments, insurtech and wealthtech sectors. Should market conditions improve, M&A activity could also pick up as private equity investors and companies look for business opportunities.

Whether an established financial institution or an emerging fintech, all market participants should ask themselves how they can grow sustainably and profitably in these uncertain times. Read more about how your company can overcome today's challenges while ensuring tomorrow's success in this issue of Pulse of Fintech.