Top Fintech trends for H1’23

During the first half of 2023, fintech funding was incredibly subdued as many investors pulled back from making major fundings in the face of myriad market challenges, notably high interest rates fundamentally challenging existing business models exacerbated by other macroeconomic challenges, geopolitical tensions, and depressed valuations. With uncertainty expected to be the status quo in the near-term, fintech funding is expected to remain subdued heading into H2’23 — although the long-term outlook for the transformation of financial services remains very positive. Here are our top predictions for fintech in H2’23:

Investors will continue to prioritize profitability when making investments:

The days of major funding in structurally unprofitable companies has passed. Fintech investors will increasingly prioritize companies able to demonstrate top-line revenue growth, a strong grasp of unit economics and shorter paths to profitability.
The payments sector will remain hot across all global markets

Given the breadth and applicability of payments solutions, funding in the payments space will likely remain quite strong; consolidation will likely increase as payments firms look to achieve greater scale and reach, and take advantage of significant scheme changes across all markets.
Corporate Ventures will embrace start-ups able to help them operate more seamlessly and efficiently

Corporate fundings will likely focus on solutions able to help their corporate customers operate more effectively and transform digitally — from cybersecurity platforms to solutions that help improve finance, supply chain, logistics, and payments processes.
M&A will rise as market conditions improve

At either end of the spectrum - distressed sales, purchases of attractive low valued assets or protective sales — or value accretive M&A, lower valuations will support a burgeoning deal market for incumbents, PE and challenger firms.
Interest in AI will continue to accelerate

Scaleups will promote their existing AI capabilities as they fundraise and ink up business, whilst new start-up will be incubated and scaled to leverage AI as a step change in operational efficiency and services. Large tech giants will be critical to the development of generative AI fintech solutions given their dependence on robust data and large language models (LLMs).
Interest in blockchain and digital asset solutions will increase in the ESG space

With crypto funding is expected to remain soft heading into H2’23 as regulators continue to tighten controls and jurisdictions jockey for position as hubs for responsible crypto funding, other blockchain-based solutions will gain more attention from investors — particularly solutions aligned with ESG and sustainability (such as carbon credits, supply chain traceability, tokenized climate solutions).