Americas attracts largest share of fintech investment and deals volume despite significant drop
Global investment in fintech sank to a five-year low of $113.7 billion across 4,547 deals in 2023 as investors pulled back from making large deals amidst concerns about stubbornly high interest rates, conflicts in Ukraine and the Middle East, falling fintech valuations, and the parched exit environment. The Americas attracted the largest share of investment during the year, accounting for $78.3 billion in fintech funding across 2,136 deals — of which the US took $73.5 billion across 1,734 deals — compared to $24.5 billion across 1,514 deals in the EMEA region and $10.8 billion across 882 deals in the ASPAC region.
H2’23 sees small uptick in global fintech investment, driven by 6 $1 billion+ deals
Fintech investment globally grew slightly between the first and second half of the year, rising from $55.5 billion in H1’23 to $58.2 billion in H2’23. Six $1 billion+ deals helped propel H2’23 results, including the $11.7 billion acquisition of US-based Black Knight by Intercontinental Exchange, the $10.5 billion acquisition of US-based Adenza by Nasdaq, a $6.9 billion PE raise by UK-based Finastra, the $1.2 billion buyout of US-based Avantax by Cetera, the $1 billion VC raise by California-based Generate and the $1 billion acquisition of Brazil-based Pismo by Visa.
Global fintech-focused VC investment falls off a cliff in 2023
Global VC investment in fintech dropped dramatically, both year-over year — from $88.8 billion in 2022 to $46.3 billion in 2023 — and between H1’23 ($27.5 billion) and H2’23 ($18.8 billion). While VC investment declined across all deal stages, investment in later stage deals fell off a cliff —dropping from $37.4 billion in 2022 to $14.1 billion in 2023. While the economics of VC dealmaking changed dramatically over the course of the year, VC investors globally continued to show interest in a number of areas, most notably AI-focused fintech solutions.
Proptech reaches record high for investment; payments remains top sector
The proptech sector saw a new high of funding in 2023, with over $13.4 billion in funding. While this funding was primarily driven by the $11.7 billion acquisition of Black Knight, proptech is a growing area of interest to investors both from a property management perspective and from an ESG and climate change mitigation perspective. While both proptech and insurtech saw investment rise year-over-year, the payments space continued to account for the largest share of fintech funding in 2023 ($20.7 billion).
Fintech-focused AI attracts $12.1 billion in investment in 2023
AI was a very strong area of focus for investors in the fintech market, with numerous companies looking for ways to embed AI into related product and service offerings — particularly those related to cybersecurity and regtech. During the year, AI-focused fintech companies attracted $12.1 billion in investment. The decline in direct AI funding year-over-year is somewhat misleading as many financial institutions and fintechs are embracing AI through alliances and product spend.
Enterprise solutions viewed as a top priority across the fintech market
With D2C solutions still challenged in many subsectors of fintech, wholesale enterprise solutions continued to be a major focus for fintech investment in 2023. With both incumbent financial institutions and fintechs constantly under pressure to innovate, become more efficient, and get the most from every dollar, there was a significant amount of interest in startups able to enable transformation.
Trends to watch for in H1’24
- Growing optimism across the fintech sector as interest rates start to stabilize and valuations normalize.
- Strengthening interest in M&A opportunities, with investors increasingly looking at distressed assets.
- The payments sector remaining the hottest ticket in fintech, with increasing consolidation as companies look to scale and grow locally, regionally, and globally.
- AI continuing to be a major focus of companies across the fintech sector.
- The UAE continuing to evolve into a regional fintech hub, attracting additional attention from global investors and larger deal sizes.
- Continued focus on the development of partnerships and alliances able to help companies extend their reach and value.
