Proptech investment more than triples from US$4.1bn to US$13.4bn between 2022-2023 – a bright light in challenging year

• Americas accounts for nearly 70% of total global fintech funding, attracting US$78.3 billion in 2023
• Global VC investment in fintech falls more than 50%, from US$88.8 billion in 2022 to US$46.3 billion in 2023

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. Geopolitics conflicts, the high interest rate environment, and the barren exit environment across regions saw fintech investors holding onto their cash throughout much of the year.

The second half of 2023 showed a marginal gain over the first half, with total fintech investment rising from US$55.5 billion in H1’23 to US$58.2 billion in H2’23. Six $1 billion+ deals contributed significantly to this result. VC investment was not so fortunate — dropping from US$27.5 billion to US$18.8 billion between H1’23 and H2’23.

Regionally, the Americas accounted for nearly 70% of total fintech funding in 2023, accounting for $78.3 billion across 2,136 deals. The US accounted for the lion’s share of this investment ($73.5 billion). Comparatively, the EMEA region saw $24.5 billion of total fintech investment across 1,514 deals, while the ASPAC region saw $10.8 billion across 882 deals. At a sector level, the payments space attracted the largest share of fintech investment globally ($20.7 billion)—although it was a major drop from the $58 billion seen in 2022. By comparison, proptech and ESG were very hot with investors; proptech investment reached a record high of $13.4 billion in 2023, while ESG-focused fintech investment rose from $1.2 billion to $2.3 billion year-over-year.

“The fintech market floundered somewhat in 2023, buffeted by many of the same issues challenging the broader investment climate. While there were still good deals to be had, investors were definitely sharpening their pencils—enhancing their focus on profitability,” said Anton Ruddenklau, Global Head Fintech and Innovation, Financial Services, KPMG International. “While it was a depressed year for the fintech market overall, there were a few particularly bright lights. Proptech, ESG fintech, and investors embraced AI-focused fintechs—which helped particularly in the last six months.”

2023 key 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.

Second best year for ESG fintech investment

2023 was the second-best year for fintech investment on record, with the $2.3 billion in investment second only to 2021’s peak high of $3.7 billion. The US accounted for the largest deals in this space in 2023. The combination of ongoing regulatory changes and the ambitious net zero commitments by both governments and businesses will likely keep investment in ESG-focused fintech solutions on a positive trend heading into 2024.

Artificial intelligence a key priority for 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. AI-driven fintech companies accounted for $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 H1’24

Given the ongoing global conflicts, the high interest rate environment, and the continued lack of exits, global 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.