Fintech investment falls by 31% in 2022
Payments remained the strongest area of fintech investment in 2022 with regtech the only sub-sector to actually see growth in investment.
Global investment into the fintech market fell to $164.1bn in 2022 from a high of $238.9bn the previous year, according to KPMG.
Despite the fall, of more than 31 per cent, 2022 was still one of the highest years on record for fintech investment with some areas of still seeing growth. Regtech, as a sub-sector of fintech, bucked a downward trend by growing in size and reaching $18.6bn.
The numbers come from KPMG’s latest Pulse of Fintech report, which found the sharper drop for 2022 accelerated in the second half of the year partly due to the collapse in crypto confidence after several notable scandals.
While $119.2bn was raised in the first six months of 2022, just S$44.9bn was raised in the second half of the year.
“2022 was a tale of two fintech markets. The variance between the first half of the year and the second highlights the rapid shift in investor sentiment amidst a combination of challenges—high inflation and rising interest rates, the lack of IPO exits, the downward pressure on valuations, and, of course, the turbulence in the crypto space,” said Anton Ruddenklau, Global Head of Financial Services Innovation and Fintech, KPMG International.
“But the news wasn’t all negative. Regtech, in particular, saw incredible investment in 2022, while seed-stage deals received excellent attention from investors after years of late-stage deals getting priority.”
Fintech investment within the EMEA region dropped from $79bn across 2,379 deals in 2021 to $44.9bn across 1,977 deals in 2022.
“With interest rates still rising, valuations are going to remain quite tricky for some time. This will likely keep a lot of the biggest potential M&A transactions on the shelf as investors wait to see if prices come down even further,” said Ruddenklau.
“That said, M&A activity will likely increase for smaller size deals as corporates and larger fintechs look to buy fintech capabilities at good value,” he added.