KPMG: Fintech Funding Fades in 2023

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

The Asia-Pacific (ASPAC) region witnessed the most pronounced decline, with investments plummeting from $51.3 billion in 2022 to just $10.8 billion in 2023. Meanwhile, the Europe, Middle East, and Africa (EMEA) region saw a reduction in fintech investment from $49.6 billion to $24.5 billion. The Americas, while also experiencing a decline, demonstrated relative resilience with fintech investments decreasing 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 downturn, certain subsectors showed remarkable resilience or even growth. Investment in the payments sector, although reduced from $57.9 billion in 2022 to $20.7 billion in 2023, remained the largest share of fintech funding. Notably, proptech and insurtech subsectors bucked the trend, with investments rising to $13.4 billion and $8.1 billion, respectively, showcasing areas of continued investor interest.

Artificial intelligence (AI) continued to lead technology investments in fintech, attracting over $12.1 billion despite the funding slowdown. This indicates sustained confidence in AI's potential to drive innovation and efficiency within the fintech sector.

Singapore's fintech market, in particular, showcased resilience and strategic adaptability. AI fintech funding in Singapore surged by 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 experienced a decline, mirroring the global trend, with total funding dropping by 68% from $4.4 billion in 2022 to $2.20 billion in 2023. Despite these challenges, Singapore continued to solidify its status as a leading fintech hub in the Asia-Pacific region, capturing 21% of all fintech deals in the region in 2023.

Looking forward, the fintech sector globally is expected to face continued caution in early 2024, with a potential rebound anticipated later in the year as interest rates are expected to reduce. The focus on AI and B2B solutions, along with a growing interest in mergers and acquisitions as a strategy to acquire distressed assets, suggests a strategic shift towards more sustainable and profitability-focused investment approaches.