European Fintech Industry Feels The Pinch As Funding Drops

The European fintech has felt the pinch of the global decline in funding across the fintech industry. The funding in this sector during the first six months of 2023 dropped by more than half compared to the previous period.

European fintech sector records a plunge in funding

The fintech sector witnessed a rough six months in 2023, according to the Pulse of Fintech report by KPMG. The total funding and the number of deals posted in this sector dropped from $63.2 billion during the second half of 2022 to $52.4 billion during the first half of 2023.

In the Americas, funding to the fintech industry increased from $28.9 billion to $36.1 billion amid a plunge in deals volume from 1,323 to 1,011 deals. However, the same sentiment was not seen across the EMEA region, where fintech funding plunged by over 50% from $27.3 billion in H2 2022 to $11.2 billion.

The total fintech investment across the UK also plunged to $5.9 billion, a massive drop from the $13.8 billion reported during the same period in 2022. In the APAC region, fintech funding declined from $6.8 billion in H2 2022 to $5.1 billion in the first quarter of this year.

Uncertainty rocks the fintech industry

The fintech market is also facing a wave of uncertainty because of the prevailing economic conditions. The levels of inflation have remained significantly high, with central banks raising interest rates to tame the increase. The tense geopolitical climate and devaluations across the tech sector are also weighing down the fintech industry.

However, not all developments in the fintech sector were negative. Several sectors attracted significant funding during the first half of 2023. Fintechs operating in the supply and logistics sectors attracted $8.2 billion worth of funding during the first six months of 2023. The green fintech space also garnered interest and generated $1.7 billion worth of funding in H1 2023.

The global head of financial services at KPMG, Judd Caplain, said, “the long-term business case for many subsectors within fintech remains very strong – particularly for sectors like payments, insurtech, and wealthtech. Once market conditions begin to even out, funding will likely rebound-if not to the record level experienced in 2021.”

The tense economic climate might persist, with the geopolitical and macroeconomic uncertainties worsening. As such, funding across the fintech space could remain low as the year progresses. According to KPMG, the generative AI sector might continue posting an increase in funding.

The fintech leader at KPMG, Anton Ruddenklau, said that the application of generative AI in financial services was still in the early stages. However, this area might continue garnering interest and immense funding from investors based on its applications in cybersecurity, regtech, and wealthtech.

Ruddenklau said that in the next six months, the company would continue seeing an increase in the number of investors in this space, with corporates demanding ways to use generative AI in an effective manner.