2023 was a challenging year for the fintech market, with total global fintech investment dropping from US$196.6 billion across 7,515 deals in 2022 to a six-year low of US$113.7 billion across 4,547 deals in 2023 according to the Pulse of Fintech H2’23—a bi-annual report published by KPMG highlighting global fintech investment trends.
Australia saw a 76% drop in fintech deal value “in 2023 to US$587.5 million, while the deal count fell by a third to 95 transactions.”
Notable Australian fintech deals “tracked by the report include taxi payment platform operator A2B’s acquisition by Singapore-listed transportation firm ComfortDelGro for $109.5 million, and deferred payment loan provider Midkey raising US$50 million in early stage venture capital.”
In addition, one of Australia’s robo-advisers, Stockspot, was “acquired by Korean firm Mirae Asset Global Investments, while Rich Data Co. raised US$17.5 million and SME lender Lumi raised an additional US$15 million.”
Dan Teper, Head of Fintech, KPMG Australia, commented:
“As expected, 2023 was a challenging year for the Australian fintech ecosystem, with both total deal value and deal count experiencing a sharp decline compared to previous years. The local market, as with the majority of global markets, has been impacted by a number of challenges including, but not limited to, a higher inflation and corresponding higher rates environment, and a change in overall risk appetite amongst investors”
2023 key global fintech highlights
Global fintech investment was US$113.7 billion “across 4,547 deals in 2023 – down from US$$196.6 billion across 7,515 deals in 2022.”
The Americas attracted US$78.3 billion “across 2,136 deals in 2023—of which the US accounted for US$73.5 billion across 1,734 deals—while the EMEA region attracted US$24.5 billion across”
1,514 deals, and the ASPAC region “attracted US$10.8 billion across 882 deals.”
Global M&A deal value dropped “from US$98.2 billion in 2022 to US$56.4 billion in 2023; global VC investment declined from US$88.8 billion to US$46.3 billion year-over-year. PE growth investment showed the most resilience, up from US$9.6 billion in 2022 to US$11 billion in 2023.”
Payments remained the strongest area of fintech investment globally in 2023, “with US$20.7 billion in investment compared to US$58 billion in 2022; 2023 investment in other notable sectors included proptech (US$13.4 billion), insurtech ($8.1 billion), crypto and blockchain (US$7.5 billion), regtech (US$2.6 billion), ESG fintech (US$2.3 billion), and cybersecurity (US$1.3 billion).”
Corporate-participating VC investment globally “fell from US$45.9 billion in 2022 to US$25.2 billion in 2023.”
Artificial intelligence a key priority for fintech investors
Interest in AI gathered a lot of steam across the investment market over the course of 2023, and the fintech market was no exception. Globally, AI-driven fintech companies accounted for US$12.1 billion in investment in 2023. While this reflects a significant decline in funding compared to the US$28.1 billion seen in 2022, the decline in investment does not reflect any lessening of interest in the space; during 2023, many financial institutions and fintechs chose to embrace AI through alliances and product spend rather than through direct investment.
Fintech investment expected to remain soft into 2024
Given the ongoing global conflicts, the high interest rate environment, and “the continued lack of exits, fintech investment is expected to remain soft heading into the first quarter of 2024.”
As interest rates stabilize and possibly “begin to decline, investment could begin to pick up. AI and B2B solutions will likely remain big tickets for investors. M&A activity could also start to rebound as investors more seriously look at distressed assets.”
Teper said:
“Looking ahead, we expect fintech growth in Australia to continue to be modest, and with interest rates unlikely to shift materially in the near term, funding and availability of capital are likely to remain a key challenge for local players.”