KPMG: Fintech Funding Fades in 2023

The global fintech market experienced its most challenging year since 2017, with investment falling to $113.7 billion. Singapore’s AI Fintech sector reported a 77% increase in funding.

The latest edition of the KPMG Pulse on Fintech report highlights a challenging year for the global fintech market in 2023, with investment levels and deal activity experiencing a significant decline. Global fintech investment fell to $113.7 billion in 4,547 deals, marking the weakest performance since 2017 and a significant decline from $196.6 billion in 7,515 deals in 2022. This decline reflects a broader trend of investor caution against a complex backdrop of high interest rates, inflation, geopolitical tensions and valuation concerns.

The Asia-Pacific region (ASPAC) witnessed the most pronounced decline, with investment falling sharply from $51.3 billion in 2022 to just $10.8 billion in 2023. Meanwhile, the Europe, Middle East and Africa (EMEA) region saw fintech investment drop from $49.6 billion to $24.5 billion. The Americas, while experiencing a decline, have demonstrated relative resilience with fintech investment falling from $95.4 billion in 2022 to $78.3 billion in 2023, with the United States alone accounting for 73 .5 billion of the total funding.

Despite the overall decline, some sub-sectors have shown remarkable resilience or even growth. Investments in the payments sector, although reduced from $57.9 billion in 2022 to $20.7 billion in 2023, remain the largest share of fintech funding. Notably, the proptech and insurtech subsectors bucked the trend, with investment rising to $13.4 billion and $8.1 billion respectively, demonstrating areas of continued investor interest.

AI (AI) continued to lead technology investment in fintech, attracting more than $12.1 billion despite a slowdown in funding. This shows sustained confidence in AI’s potential to drive innovation and efficiency in the fintech sector.

Singapore’s fintech market, in particular, has demonstrated resilience and strategic adaptability. AI Fintech funding in Singapore grew 77% in the second half of 2023 to $333.13 million, contributing to a total of $481.21 million across 24 deals for the year. This growth in AI funding is a testament to the region’s commitment to fostering technological innovation amid broader market challenges. However, overall fintech investment in Singapore has seen a decline, mirroring the global trend, with total funding falling 68% from $4.4 billion in 2022 to $2.20 billion in 2023. Despite these challenges, Singapore has continued to cement its status as a leading fintech hub across the Asia-Pacific region, accounting for 21% of all fintech transactions in the region in 2023.

Looking ahead, the global fintech sector is expected to face continued caution in early 2024, with a potential recovery expected later in the year as interest rates are expected to ease. The focus on AI and B2B solutions, together with the growing interest in M&A as a strategy for acquiring distressed assets, suggests a strategic shift towards more sustainable and yield-focused investment approaches.

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