A Deep Dive
Fintech investment saw a global decline in the first half of 2024, reaching its lowest point since the first half of 2020. This blog post will explore the key trends that shaped the fintech investment landscape, highlighting the sectors and regions that attracted the most interest.
Global Fintech Investment Slides in the First Half of 2024
Global investment in fintech across VC, PE and M&A fell to $51.9 billion in H1 2024, marking the lowest six months of fintech investment since the first half of 2020. This decline can be attributed to:
- Geopolitical uncertainty
- High-interest rates
All regions saw a dip in fintech investment, with EMEA experiencing the most significant drop, from $19.4 billion in H2 2023 to $11.4 billion in H1 2024.
Payments Dominate, While Regtech Shows Growth
Despite the overall decline, some fintech sectors showed resilience. Payments continued to be the most attractive sector, garnering $21.4 billion in H1 2024. This dominance can be attributed to several factors:
- The shift towards digital payments
- The surge in mobile payments
- The modernization of B2B payments
However, it’s worth noting that two major buyouts in the Americas, Worldpay ($12.5 billion) and Nuvei ($6.3 billion), significantly contributed to the overall investment in payments.
Regtech was the only subsector that experienced an investment surge in H1 2024, surpassing the total investment it received in 2023 with $5.3 billion. Key factors driving this growth include:
- The increasing complexity of regulatory requirements
- The growing pressure on financial services companies to ensure compliance
AI Remains a Hot Area of Interest for Fintech Investors
Artificial intelligence (AI) continues to be a focal point for investors, particularly in the US. Several significant AI-focused fintech deals were recorded in H1 2024, including:
- The acquisition of cyber insurance company Corvus by Travelers for $427 million
- Salesforce’s acquisition of compensation-focused platform Spiff for $419 million
- A $150 million VC funding round raised by corporate management company Ramp
Regional Insights: Americas, EMEA and ASPAC
- Americas: The Americas, primarily driven by the US, continued to attract the largest share of fintech investment. However, a significant portion was concentrated in large buyout deals, with VC investment showing weakness, particularly in the growth stage.
- EMEA: The EMEA region experienced the most significant decline in fintech investment. Nevertheless, VC funding demonstrated resilience, driven by optimism regarding the potential reopening of the IPO market in the second half of the year.
- ASPAC: Fintech investment in the ASPAC region also declined, primarily due to smaller deal sizes. Despite this, China’s central government continued to prioritize financial services innovation, particularly in areas like digital finance, green finance and technology finance.
Key Trends to Watch in H2 2024
- Convergence of Traditional Finance and Decentralized Finance: Jurisdictions globally are increasingly exploring and approving activities that blend traditional finance with decentralized finance, such as tokenizing real-world assets.
- Continued Dominance of AI: AI will likely remain the dominant area of interest for investors, with a focus on both improving operating efficiencies and developing AI-powered cybersecurity solutions.
- Increasing Focus on Regtech: The constant evolution of regulatory regimes and the increasing complexity of reporting requirements will likely lead to sustained growth in the regtech sector.
- Emergence of Less Traditional Fintech Markets: Investors are increasingly looking at less traditional markets, such as Africa and parts of Southeast Asia, for opportunities in areas like the digitization of payments.
Fintech Investment Outlook for the Remainder of 2024
The fintech investment landscape in the first half of 2024 paints a picture of cautious optimism. While macroeconomic conditions and geopolitical uncertainties persist, certain sectors like payments and regtech have shown resilience and growth potential. The increasing focus on AI and the exploration of new markets suggest that the fintech industry is poised for continued evolution and innovation in the coming years.
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