Global fintech funding declines in H1'23

• Increasing focus on operational efficiency, sustainable cash flows, and profitability — both from investors and from fintechs looking to delay their next funding rounds.
• Continued resilience of the payments space —particularly payments infrastructure.
• ­Declining crypto funding in the wake of sector challenges, combined with increasing focus on broader blockchain solutions.
• Rapidly growing interest in potential use cases for generative AI, particularly in cybersecurity, insurtech, and wealthtech.

Heading into the second half of 2023, market challenges are expected to continue — which could make for another bumpy six months. AI is expected to be a hot topic of conversation — and likely funding — even if fintech activity remains subdued. As the market begins to stabilize, however, funding in fintech will likely perk up. Payments, in particular, is well positioned to see funding continue and accelerate, in addition to insurtech and wealthtech. Should market conditions improve, M&A activity could also start to climb again as PE investors and corporates look for good deals.

Whether you’re the CEO of a large financial institution or the founder of an emerging fintech, it’s critical to consider how your company can grow sustainably and profitably even in these uncertain times. As you read this edition of Pulse of Fintech, ask yourself: How can we position our organization to weather today’s storms while positioning for long-term success?

Total fintech funding in the EMEA region dropped considerably — from $27 billion in H2’22 to just $11 billion in H1’23 — as investors in the region enhanced their focus on profitability in the wake of global macroeconomic uncertainty, rising interest rates, the intense pressure on valuations, and a reduction in multiples. Despite the slowdown, the region is expected to remain strong over the longer term once the market uncertainty lessens.

The UK attracted the majority of fintech funding in the EMEA region in H1’23, accounting for half of the region’s 10 largest deals, including the $3.1 billion buyout of data insights firm Wood Mackenzie by Veritas, a $602 million raise by AI-powered lending company Abound, and a $250 million raise by e-trading platform eToro. Other countries that attracted large deals included France (Ledger — $493 million), Switzerland (Teylor — $299 million; Metaco — $250 million), Sweden (SignUp Software — $229 million), and Germany (Moonfare — $152 million). 

• Increasing focus on embedded payments and embedded finance, catalyzed by PSD3.
• Growing attention to wealthtechs focused on democratizing access to funding in asset classes once limited to PE firms and other large-scale investors.
• Strengthening focus on the use of AI and intelligent automation across financial services, including in the insurance and wealth management sectors.
• The role of banks evolving to include more partnerships with fintechs, retailers, and other companies, such as through the offering of B2B embedded banking solutions.
• Emergence of UK crypto regulations in an effort to position itself as a global crypto center.
• Growing M&A activity, particularly from corporates as inflation and interest rates stabilize.
• A thinning out of the number of fintech companies as cash-strapped companies desperate for funding seek sales to other companies.
• Professional investors keeping their spending low. Retaining their power to help their existing portfolio fundings overcome the current drought, avoiding down rounds as much as possible, as multiples in private markets drop following the trend in public markets.