Pulse of Fintech H2 2023

Payments attracts biggest share of fintech funding globally despite year-over-year drop 

Despite a significant decline in annual investment — from $58 billion in 2022 to $20.7 billion in 2023 — and the number of deals — from 892 to 506 — the payments space continued to account for the largest share of fintech investment globally.  In H2’23 there was a clear pullback in mega deals with two billion dollar deals, (Finastra – $6.9 billion, Pismo – $1 billion). Comparatively, H1’23 saw four payments deals greater than $1 billion (i.e., Stripe - $6.9 billion, EVO Payments - $4 billion, Moneygram - $1.8 billion, and Paya - $1.3 billion). Despite a significant decline in deal value, the M&A space remained quite active during the second half of the year as a result of ongoing global, regional, and local consolidation efforts across companies focused on providing core payments platforms and related services.

After very weak 2022, global insurtech investment rises year-over-year

After falling to a seven-year low of $5.9 billion in 2022, global investment in insurtech rose to $8.1 billion in 2023 moving closer to the funding levels it enjoyed 2019-2022. While the largest deal of the year — the $2.6 billion buyout of Duck Creek Technologies by Vista Equity partners occurred during H1’23, H2’23 saw a number of solid deals, including the $1.2 billion buyout of Avantax by Cetera and the $570 million acquisition of Benefitfocus by Voya Financial — both in the US. The insurtech sector also saw a number of $100 million+ VC raises in the second half of 2023, including US-based Next Insurance ($265 million), US-based Branch ($215 million), and Singapore-based Bolttech ($246 million).

Regtech plummets to six-year low in 2024

After attracting a record $21 billion in 2022, total regtech investment plummeted to a six-year low of $2.6 billion in 2023. Rising interest rates and other macroeconomic factors likely drove much of the pause in investment, while the mismatch between buyer and seller valuation expectations likely contributed to the very dry M&A environment. The largest deals of H2’23 all occurred in the VC space, including a $400 million by UAE-based Haqqex and a $125 million raise by US-based Vestwell.

After two solid years, wealthtech investment plummets in 2023

Total global investment in the wealthtech sector fell to under $200 million in 2023 — although both total deal value and the number of wealthtech deals remained near to par with the levels seen in 2020.  Similar to other fintech sub-sectors, global geopolitical uncertainties and macroeconomic pressures — including high interest rates — saw many investors holding back from making major investments. The largest wealthtech deal of H2’23 was a $73 million raise by US-based investment firm Edward Jones.

Annual global investment in cybersecurity drops for second straight year

Global investment in cybersecurity fell to $1.3 billion in 2023 — a very subdued result, particularly compared to the record $4.4 billion of cybersecurity investment seen in 2021. Activity was particularly soft in the second half of the year; the largest deal of H2’23 was a $100 million raise by US-based AI security platform company Resilience,9 compared to the $493 million VC raise by France-based digital asset security provider Ledger and the $250 million acquisition of Switzerland-based cryptocurrency custody company Metaco by US-based settlements firm Ripple in H1’23.  The surge in interest in AI-driven security solutions, however, could help drive additional attention and investment into the cybersecurity space heading into H1’24.

Deal volume drops by 50 percent year-over-year in crypto and blockchain

Total investment in the crypto and blockchain space dropped from over $24 billion in 2022 to less than $8 billion in 2023, while deal volume dropped from 2,058 deals to just 1,104 during the same frame. In addition to the challenging macroeconomic factors seen this year, the crypto and blockchain sector had to weather the impact of the crypto firm collapses seen in 2022 and the closures of a number of trade finance platforms built on blockchain-technologies, including Singapore-based Contour, R3’s Marco Polo and Maersks Tradelens. During H2’23, the largest deals in the crypto and blockchain space included a $400 million VC raise by UAE-based digital asset trading platform Haqqex, a $110 million VC raise by UK-based blockchain.com, and a $100 million raise by US-based crypto custody firm BitGo.

ESG and greentech remain in vogue, albeit with somewhat variable deal flow

Global investment in ESG-focused fintech reached $2.3 billion in 2023 — the second highest annual total following 2021’s outlier high of $3.7 billion. The space attracted a number of very sizeable deals over the course of the year. The US attracted the vast majority of ESG-focused fintech investment this year, likely driven by investment trends across the broader fintech sector, rather than by any substantial decline in investor interest in the EMEA and ASPAC regions.