Investment in fintech in 2024
Fintech investment saw a downturn globally as investors opted to hold onto their money. The biannual report on global fintech investment trends, Pulse of Fintech H2’23 by KPMG, revealed that fintech investments decreased from US$196.6 billion over 7,515 agreements in 2022 to US$113.7 billion across 4,547 deals in 2023. According to the analysis, while 2023 was a difficult year for the fintech industry as a whole, the decline was mostly caused by a confluence of rising interest rates, geopolitical events, and a parched exit climate.
Similar to the worldwide fintech market, in 2023, fintech investment in the Europe, Middle East, and Africa (EMEA) region fell to a seven-year low of US$24.5 billion through 1,514 deals, down from US$49.6 billion through 2,478 agreements in 2022. The top ten deals in the region were made by fintechs from seven different nations, with the United Arab Emirates’ Tabby (US$950 million) and Haqqex (US$400 million) being two of the notable examples. Nevertheless, the region’s fintech market shows strong geographic variety.
Commenting on the outlook for fintech investment in Kuwait, Ankul Aggarwal, Partner and Head of Deal Advisory, KPMG in Kuwait, said, “Kuwait’s fintech sector is rapidly catching up with the global markets and witnessing an increase in industry participants such as digital payments facilitators, insurtech, and P2P platforms, among others. The Central Bank of Kuwait (CBK) has created an enabling environment for fintech innovation by implementing a range of initiatives, such as updated e-payment regulations and digital banking guidelines. Additionally, CBK is also working towards an open banking framework.”
The research predicts that in H1’24, the EMEA region will witness an increase in the emphasis on embedded finance and banking offerings, the adoption of the Buy Now, Pay Later (BNPL) model, consolidation in the BNPL market, asset tokenization, and the use of artificial intelligence (AI) to address customer service and fraud prevention issues.
Ankul further added, “In Kuwait, largely, fintech companies are focusing on the unbanked and underbanked segments of the market to carve a niche for themselves and offer related solutions, while traditional banks are moving towards adopting a value-added solutions approach focusing on embedded finance and banking offerings.”
Proptech and ESG emerged as investment hotspots on a sectoral level, with proptech-based investments hitting a record high of US$13.4 billion worldwide. In terms of ESG fintech investment, 2023 was the second-best year, according to the report, as it doubled to reach US$2.3b year over year (YOY). ESG-focused fintech solutions are expected to see growth through 2024, especially in light of the ongoing regulatory reforms and the aggressive net zero commitments made by enterprises and governments.
Furthermore, the fintech industry saw a peak in investor interest in AI, as seen by the US$12.1 billion in funding received by AI-driven fintech businesses in 2023. The research emphasizes that although this represents a decrease in funding from US$28.1b in 2022, it does not show a loss in interest in the market because many fintechs and financial institutions adopted AI through product spending and partnerships rather than direct investment.
The following are some other standouts from the report:
- In 2023, the Americas brought in US$78.3 billion from 2,136 deals, of which US$73.5 billion came from 1,734 deals. The EMEA and ASPAC regions brought in US$24.5 billion and US$10.8 billion from 1,514 and 882 deals, respectively.
- Global venture capital (VC) investment fell from US$88.8 billion to US$46.3 billion year over year, while the value of M&A deals worldwide fell from US$98.2 billion in 2022 to US$56.4 billion in 2023. The most resilient growth investment was in private equity (PE), which increased from US$9.6 billion in 2022 to US$11 billion in 2023.
- With US$20.7 billion invested in 2023 compared to US$58 billion in 2022, payments continued to be the largest fintech sector globally. Other noteworthy sectors with significant investment in 2023 included proptech (US$13.4 billion), insurtech (US$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).
- Global corporate VC investment dropped from US$45.9 billion in 2022 to US$25.2 billion in 2023.
Due to ongoing conflicts throughout the world, rising interest rates, and a persistent shortage of exits, the biannual report predicts that fintech investment will remain slow heading into the first quarter of 2024. Investors anticipate AI and B2B (business-to-business) solutions to become increasingly important as interest rates level out and possibly even go down. According to the paper, if investors start paying closer attention to distressed assets, mergers and acquisitions (M&A) activity may also increase.
