The Pulse of Fintech, a KPMG overview of the fintech sector, showed a drop in overall global funding from $63.2 billion in the second half (H2) of 2022 to $52.4 billion in the first half (H1) of 2023. This equated to a drop from 2,885 to 2,153 deals.
The US accounted for $34.9 billion, or two-thirds of H1 2023 funding. There were seven $1 billion+ deals in H1 2023, five of which were in the US.
Meanwhile funding fell by more than half – $27 billion to $11 billion – in the EMEA region, as ASPAC deals shrank from $6.8 billion to $5.1 billion.
Strong growth in AI investment
There is little doubt that AI was the main winner, with strong growth predicted for the foreseeable future, especially in generative AI, as “companies around the world look to leverage AI’s full potential as part of efforts to improve both operational efficiencies and customer value”.
KPMG’s prediction for the second half of 2023 was that fintech funding would remain “relatively soft – although if the market stabilizes, fintech funding could start to see a cautious rebound”.
“It is still very early days when it comes to the application of generative AI to use cases in financial services. But looking forward, it is an area that is attracting enormous interest and funding – particularly in areas like cybersecurity, regtech, and wealthtech.”
Anton Ruddenklau, Global Fintech Leader, KPMG
“It is still very early days when it comes to the application of generative AI to use cases in financial services,” says Anton Ruddenklau, Global Fintech Leader, KPMG. “But looking forward, it is an area that is attracting enormous interest and funding – particularly in areas like cybersecurity, regtech, and wealthtech. Over the next six months, we’ll start to see an uptick in investors embracing the space as corporates demand ways to leverage generative AI effectively.”
Supply chain and logistics-focused fintechs accounted for $8.6 billion of H1 2023 funding, while insurtech amounted to $4.7 billion and B2B fintech $3.7 billion.
However this was dwarfed by the $16.2 billion flowing into payments. Several major deals made up the lion’s share of this:
- the $8 billion buyout of Coupa by Thomas Bravo;
- the $6.9 billion VC raise by Stripe;
- the $4 billion acquisition of EVO payments by Global Payments;
- the $2.6 billion buyout of Duck Creek Technologies by Vista Equity Partners;
- the $1.8 billion buyout of Moneygram by Madison Dearborn Partners LLC.
Green fintech surpasses expectations
Green fintech attracted $1.7 billion in funding during H1 2023, ahead of the sector’s 2022 total results.
“It was a surprise to see fintech funding decline in the first six months of 2023, given the enormous headwinds pressuring the market at the moment,” says Judd Caplain, Global Head of Financial Services, KPMG. “But the long-term business case for many subsectors within fintech remains very strong –particularly for sectors like payments, insurtech, and wealthtech. Once market conditions begin to even out, funding will likely rebound – if not to the record level experienced in 2021.”
Green fintech is any initiative aligned with the UN’s Sustainable Development Goals. This includes improved risk management, lower costs through efficiency and automation, increased inclusive prosperity, improved natural resource productivity, and environmental resilience.