US Insights: Pulse of Fintech

The 2023 global fintech landscape has been quite challenging, buffeted by stubbornly high interest and inflation rates, heightened regulatory scrutiny, supply chain issues, and geopolitical conflicts. The U.S. fintech ecosystem, however, showed resilience amid ongoing uncertainty with increased activity in private equity (PE) and a growing emphasis on embedded digital finance solutions across the supply chain. 

• Fintech dealmaking may show signs of flattening out, but this is not unfamiliar territory for the U.S. fintech ecosystem, which has experienced comparably low dealmaking levels in the past. M&A activity in 2023 declined compared to 2022, reaching a level even lower than that of the pandemic period in 2020. Although the quarterly deal value saw a rise by the second half of 2023, the overall number of deals was low. 
• PE has maintained its presence in the U.S. fintech sectors despite a difficult lending environment. The holding period for PE firms has increased to 6.4 years, up from 5 years in 2021. “Take-private” transactions have remained strong, staying above historical highs despite being lower than 2022 levels. Corporate carve‑outs and divestitures also exhibited strength in the second half of 2023.
• Among the fintech subsectors, the payments space continued to account for most of the venture capital (VC) and PE activity, followed by Insurtech, PropTech, and Logistics and Supply Chain technology. Crypto deal activity witnessed a notable decrease in 2023, with only 415 transactions completed, significantly lower than previous years.

Looking ahead to the first half of 2024, dealmaking activity and investments in the fintech sector may start off in a subdued fashion but will likely pick up with a downward movement in interest rates. Digital transformation and adoption of AI technologies by consumers and businesses will continue to be critical priorities that can contribute to the long-term growth of the U.S. fintech ecosystem.