Global Fintech Market Challenges

H1 2023 - Pulse of Fintech The first six months of 2023 were quite challenging for the global fintech market. Some of the challenges were expected — high levels of inflation, rising interest rates, the ongoing conflict between Russia and Ukraine, depressed valuations, and a lack of exits; others were less so, including the collapse of several banks in the US. But while both total fintech funding and the number of fintech deals globally dropped from $63.2 billion across 2,885 deals in H2’22 to $52.4 billion across 2,153 deals in H1’23, the news wasn’t all negative. Despite market turbulence and declining funding in both the EMEA and ASPAC regions, the Americas saw fintech funding climb from $28.9 billion in H2’22 to $36 billion in H1’23. Several fintech subsectors also saw strong levels of funding in H1’23. At mid-year, funding in logistics and supply chain-focused fintech was well above all previous annual totals ($8.2 billion), while the $1.7 billion funding in ESG-focused fintech was ahead of 2022’s total. Looking back on the first half of 2023, fintech investor sentiment can be characterized as highly selective. Consider some of the key trends we’ve seen across the fintech sector over the past six months: 📌 Increasing focus on operational efficiency, sustainable cash flows, and profitability — both from investors and from fintechs looking to delay their next funding rounds. 📌 Continued resilience of the payments space —particularly payments infrastructure. ­ 📌 Declining crypto funding in the wake of sector challenges, combined with increasing focus on broader blockchain solutions. 📌 Rapidly growing interest in potential use cases for generative AI, particularly in cybersecurity, insurtech, and wealthtech. Heading into the second half of 2023, market challenges are expected to continue — which could make for another bumpy six months. AI is expected to be a hot topic of conversation — and likely funding — even if fintech activity remains subdued. As the market begins to stabilize, however, funding in fintech will likely perk up. Payments, in particular, is well positioned to see funding continue and accelerate, in addition to insurtech and wealthtech. Should market conditions improve, M&A activity could also start to climb again as PE investors and corporates look for good deals. Whether you’re the CEO of a large financial institution or the founder of an emerging fintech, it’s critical to consider how your company can grow sustainably and profitably even in these uncertain times. As you read this edition of Pulse of Fintech, ask yourself: How can we position our organization to weather today’s storms while positioning for long-term success? Source KPMG #fintech #report #payments #digitalbanking

💡 H1 2024 #FinTech Investment Landscape According to the recent report by Innovate Finance, the global financial landscape remains turbulent as of the end of the first half of 2024, marked by contrasting trends in public equity markets and private capital raising. The FinTech sector stands out for its resilience. Global FinTech investment in H1 2024 totaled $15.9 billion, a 19% decline from H2 2023. Despite this drop, there are signs of a potential bottoming out as Q2 2024 showed a slight increase over Q1. However, investment levels remain below those of all quarters in 2023, prompting questions about whether the worst is over. 🇺🇸 🇬🇧Several factors contribute to this uncertain landscape, including anticipation around over 40 major elections globally, persistent macroeconomic challenges, and the ongoing impact of high interest rates in key markets like the US and UK. The report emphasizes both the challenges and opportunities within the FinTech sector. Globally, early-stage deals (Seed and Series A) dominated, accounting for 81% of all deals. The average deal size dropped to $10.2 million, signaling a shift towards more cautious and prudent investments. This trend, while reflecting a slowdown, may indicate a healthier, more sustainable investment environment. Prominent industry voices suggest that despite the decline in investment volume, the quality of investments has improved. Companies are delivering more substantial value, setting a stronger foundation for future growth. The shift towards earlier-stage investments, particularly in a challenging market, demonstrates a focus on robust and sustainable business models. The report also highlights the continued leadership of the US in global FinTech investment, securing $7.3 billion in H1 2024, maintaining its 46% market share. The UK remains a strong second, although its share slightly declined to 12.7%. Europe's FinTech landscape mirrors global trends, with the UK outpacing the rest of Europe combined, securing $2 billion in investment. Germany and the Netherlands follow, reinforcing their growing significance as tech hubs. In the US, investment patterns align with global trends, with a bias towards earlier-stage deals. The US secured $7.3 billion across 599 deals in H1 2024, maintaining a robust presence in the FinTech sector. In summary, while the global FinTech sector faces significant change, there are encouraging signs of resilience and adaptability. The report underscores the importance of prudent investments, government support, and strategic initiatives to ensure the sector's continued evolution and success. Access the full report: https://lnkd.in/dtH8ET4e

Over the past year, I have interviewed 50+ fintech CEOs. I have identified 3 challenges for the coming years: 1/ Expanding into Europe 🇪🇺 I've noticed two types of fintechs: those that start in their home country and then move into Europe, and those that go directly (or extremely quickly) for the European market. The challenge, especially for the "home country-first" companies, is to establish operational foundations that ensure smooth scaling. Acquisitions are also a good way to expand and consolidate its activity. 2/ The race for profitability 💶 Profitability is a real challenge. I see two ways to achieve it: a positive approach, reaching the breakeven point through a mature business model and real scalability; and a negative approach, through layoffs (which may not be sustainable). Time will tell. 3/ Time for exits? 🤝 The market is maturing, and there’s a lot of excitement around IPOs. M&A is also booming, with fintechs and startups aiming to accelerate their activities, or with corporations and banks looking to diversify their operations. Do you see other challenges?

My 5 predictions on how risk & compliance strategies will change in 2025...💭 From AI breakthroughs to global compliance challenges, here’s what I think will shape risk and compliance strategies in financial services in 2025: 🚀 Generative AI becomes the everyday Copilot of risk experts: GenAI will go beyond being an assistant in pure code generation and become the trusted Copilot for risk and compliance teams. By 2025, it’ll play a central role in assisting teams to create, refine, and test risk models, helping teams work faster and more precisely with complex decision logic. The winners? Those who combine AI tools with robust testing frameworks to iterate confidently in high-stakes environments. 📄 AI and data regulation redefines compliance strategies: As AI and data regulations become more prescriptive, fintechs will prioritize governance frameworks that ensure compliance while fostering innovation. For instance, explainability requirements in AI-driven decision systems will reshape how models are built and audited. Teams that integrate transparency and compliance into their workflows—without slowing down—will gain a real edge. 🔃 Real-time, adaptive risk and fraud modeling becomes a must-have: Static models updated once a quarter won’t cut it anymore. With fraud tactics evolving rapidly and market conditions shifting constantly, adaptive, real-time models will be essential. Fintechs will need tools that let them adjust risk and fraud logic on the fly. The frontrunners will be those who can integrate cutting-edge fraud detection providers the fastest. 🌐 Data sovereignty demands more flexible, localized compliance: As cross-border expansion becomes more prominent among leading fintech companies, managing data across diverse regulatory environments will become increasingly complex. Meeting localized compliance will be critical, whether it’s tailoring underwriting to country-specific rules or meeting regional KYC/KYB standards. Teams that can quickly navigate the complexity of integrating local data sources while maintaining oversight over their global product strategies will be the best positioned to scale. 🏦 Large institutions will race for open banking compliance readiness: Although the CFPB’s open banking rules under Section 1033 won’t take effect until 2026, 2025 will see major financial institutions investing heavily in data-sharing infrastructures. These efforts will ensure compliance with the new requirements while positioning themselves to compete in the evolving open banking landscape. For many, this will mean overhauling internal systems, strengthening partnerships with fintechs, and proactively aligning their strategies to leverage expanded data-sharing capabilities. Early movers will lay the groundwork for the next wave of open banking in the US. What are your predictions for next year? I’d love to hear your thoughts!

Closing the fintech funding gap, a whitepaper by World Economic Forum In writing this post, I have read each of the recommendations and shared what I think 💭 are some of the genuine challenges associated with them in making them a reality! Investing in #digital #public #infrastructure Potential challenges: 🔻 High upfront costs and technical complexity of building #DPI 🔻 Ensuring #interoperability across different systems and countries 🔻 #Privacy and #security concerns with data sharing 🔻 Resistance from #incumbent financial institutions Enhancing #regulatory clarity and encouraging regional #collaboration Potential challenges: 🔻 Various in fintech #innovations across different countries 🔻 Balancing innovation and risk management (#data residency is one such issue) 🔻 Differing regulatory priorities across countries 🔻 Protecting national interests including the #political agenda Nurturing #talent and strengthening support networks Potential challenges: 🔻 Global #competition for limited tech talent. It’s a war 🔫 out there 🔻 #Braindrain 🧠 reality and fears 🔻 Ensuring #accelerators and #incubators provide real value Developing local financing capacity Potential challenges: 🔻 Limited risk #appetite 🍱 for #fintech investments 💰 in some markets (especially among private capital) 🔻 Lack of fintech expertise 🥼 among potential local investors 🔻 Limited range of investment vehicles 🚗 🔻 Competing investment priorities for limited capital 💵 Encouraging sustainable🌱 fintech growth strategies Potential challenges: 🔻 Pressure for rapid growth from investors and competitors. Some of the impact 🥊 funds are nothing short of scams and greenwashing 🤥 🔻 Finding suitable partners 💃🏻🕺🏼with aligned incentives While these recommendations are all sensible and provide a good #roadmap 🛣️ for closing the widening 🔛 fintech funding gap, implementing them will require coordinated efforts from multiple stakeholders and overcoming various economic, regulatory, and operational challenges. The success of these strategies may vary across different markets depending on local conditions and existing fintech #ecosystems To be honest, the creativity is no more in arriving at a list of ideas 💡 but CREATIVITY in how one implements these recommendations in an accelerate and definitive manner Execution is still the KING 👑

Highlights from the World Economic Forum's "The Future of Global Fintech" Report: 🎓 Fintech has shifted from hypergrowth to sustainable, system-embedded growth. Reported averages: customer growth ~37%, revenue ~40%, profit ~39%. Partnerships with incumbents are now a primary scaling path, boosted by open banking and digital public infrastructure. Financial inclusion is core: MSME-focused offerings rose from ~48% to ~58%, with the strongest momentum in emerging markets. ~80% of firms deploy AI across customer service, risk, and operations, improving experience, efficiency, and profitability. Regulation is broadly supportive but uneven, creating compliance complexity amid tighter funding and macro headwinds. 🎓 Implications for Global Investment Shift from blitzscaling to disciplined, cash-flow-oriented theses; higher premiums on unit economics and risk controls. Capital tilts toward infra layers (data, identity, payments rails, open-finance APIs) and AI enablement (governance, model risk, data tooling). More strategic M&A and co-investment with banks/telecoms to acquire licenses, customers, and trust. Stronger pipelines in EMDEs targeting MSMEs, alt-data underwriting, agent networks, and multilingual distribution. Valuations diverge by regulatory clarity and compliance maturity; policy risk becomes an explicit diligence workstream. 🎓 Implications for the Global Economy Productivity lift from automation and competition lowers financial frictions; MSME credit access supports job creation and GDP multipliers. Inclusion gains can reduce inequality and improve consumption smoothing, expanding the formal economy and tax base. Tighter fintech–incumbent–cloud interdependencies introduce new operational and systemic risk vectors requiring coordinated oversight. 🎓 Implications for Trade Cheaper, faster cross-border payments and embedded finance expand MSME export capacity and e-commerce participation. Interoperable data standards and digital IDs enable smoother digital trade; fragmentation (licensing, data localization) remains a brake. RegTech and compliance automation become trade enablers, while remittance corridors see efficiency gains and increased diaspora flows. #digital #economy #trade #investing #finance #fintech #welath #stockmarket #future #sustainability #ecosystem #strategy

💥 𝗛𝗮𝘀 𝘁𝗵𝗲 𝗙𝗶𝗻𝗧𝗲𝗰𝗵 𝗕𝘂𝗯𝗯𝗹𝗲 𝗕𝘂𝗿𝘀𝘁? The fintech sector has pulled back since the investment boom of 2021-2022 to a more measured and cautious landscape. As we enter 2025, the question arises: What’s next for fintech? Let’s dive in highlighting key points from Sifted's Fintech Unwrapped Report ___ 1️⃣ 𝗙𝗶𝗻𝘁𝗲𝗰𝗵 𝗶𝗻 𝟮𝟬𝟮𝟰: 𝗧𝗵𝗲 𝗡𝗲𝘄 𝗡𝗼𝗿𝗺𝗮𝗹 • After the record-breaking funding years of 2021 and 2022, fintech funding has cooled significantly. 𝟮𝟬𝟮𝟭 𝘃𝘀. 𝟮𝟬𝟮𝟰 -- Global fintech funding dropped by over 50% from its 2021 peak, reflecting a recalibration of investor sentiment. Investors are shifting their focus to more down-to-earth solutions. 𝗥𝗲𝗴𝗶𝗼𝗻𝗮𝗹 𝗗𝗶𝗳𝗳𝗲𝗿𝗲𝗻𝗰𝗲𝘀 -- Europe’s fintech sector saw funding declines in areas like payments and lending, while the U.S. still shows strength in niche fintech solutions. 2️⃣ 𝗦𝗲𝗰𝘁𝗼𝗿𝘀 𝘁𝗼 𝗪𝗮𝘁𝗰𝗵 𝗶𝗻 𝟮𝟬𝟮𝟱 • Despite the investment slowdown, several areas are poised for growth: 𝗘𝗺𝗯𝗲𝗱𝗱𝗲𝗱 𝗙𝗶𝗻𝗮𝗻𝗰𝗲 -- Integrating financial services into non-financial platforms is rapidly gaining traction across industries. 𝗕𝟮𝗕 𝗣𝗮𝘆𝗺𝗲𝗻𝘁𝘀 -- Businesses are demanding faster, cheaper, and more transparent payment solutions. 𝗖𝗹𝗶𝗺𝗮𝘁𝗲 𝗙𝗶𝗻𝘁𝗲𝗰𝗵 -- Startups addressing ESG such as Oxylus Energy are attracting interest from investors focused on sustainability. 𝗢𝗽𝗲𝗻 𝗙𝗶𝗻𝗮𝗻𝗰𝗲 -- As regulations like PSD2 expand globally, the ecosystem around data sharing and account aggregation continues to grow. 3️⃣ 𝗦𝗲𝗰𝘁𝗼𝗿𝘀 𝗙𝗮𝗰𝗶𝗻𝗴 𝗛𝗲𝗮𝗱𝘄𝗶𝗻𝗱𝘀 These sectors are experiencing stagnation: 𝗕𝘂𝘆 𝗡𝗼𝘄, 𝗣𝗮𝘆 𝗟𝗮𝘁𝗲𝗿 (𝗕𝗡𝗣𝗟) -- Regulatory scrutiny and rising default rates have curbed investor enthusiasm. 𝗖𝗿𝘆𝗽𝘁𝗼 𝗙𝗶𝗻𝘁𝗲𝗰𝗵 -- The sector is stabilizing after the market correction of 2022-2023, with cautious optimism returning. 4️⃣ 𝗕𝟮𝗕 𝘃𝘀. 𝗕𝟮𝗖: 𝗪𝗵𝗼’𝘀 𝗟𝗲𝗮𝗱𝗶𝗻𝗴? • B2B Fintech is emerging as the dominant force, with more sustainable revenue models and higher lifetime customer value (LTV). • B2C Fintech is struggling to maintain the growth it experienced during the pandemic but still holds potential in specific niches like wealth management. 𝗪𝗵𝘆 𝗜𝘁 𝗠𝗮𝘁𝘁𝗲𝗿𝘀 For founders, investors, and professionals, the key to thriving in this space lies in understanding market shifts, leveraging new technologies, and identifying sustainable business models. Sources: Sifted Fintech unwrapped 4.0 report 🔔 Follow Jason Heister for daily Fintech and Payments guides, technical breakdowns, and industry insights.