KPMG Pulse of Fintech – H1’2023
- Global funding in fintech dropped 17 percent to US$52.4 billion across 2,153 deals in H1’23, while Singapore H1’23 funding fell to US$934 million across 84 deals from H2’22
- Singapore’s artificial intelligence and machine learning fintechs attracted US$129 million in H1’23
- Payments, crypto and AI deals demonstrated some resilience amongst fintech subsectors within Singapore
- Americas sees fintech funding climb from US$28.9 billion in H2’22 to US$36.1 billion in H1’23 as investors enact protective measures to avoid down rounds
- With US$8.2 billion of funding, global supply chain and logistics focused fintech funding surpasses previous annual record.
- H1’23’s US$1.7 billion in global green fintech funding already ahead of 2022 total
SINGAPORE –
Media OutReach – 1 August 2023 – In the first six months of 2023, Singapore fintechs raised US$934 million across 84 deals in mergers & acquisitions (M&A), private equity (PE), and venture capital (VC), according to the KPMG Pulse of Fintech H1’23 – reflecting a 41 percent fall from US$1.6 billion across 117 deals in H2’22. Global trends echo local analysis with total funding and the number of deals dropping, from US$63.2 billion across 2,885 deals in H2’22 to US$52.4 billion in across 2,153 deals in H1’23. In Singapore, the fintech funding has yet to fully correct from the pandemic funding surge that began in H2’19, reflecting H1’23 performance as a three-year low, but still well above the H1’19 funding slump of US$344 million across 70 deals (see Figure 1) in the link below.
Global and Singapore fintech funding reduced – KPMG Singapore
The cloud of uncertainty permeating the global market continued to wear on investors, driven by factors including global macroeconomic concerns (high inflation and rising interest rates), geopolitical tensions, and tech sector challenges (depressed valuations and a continued lack of exits). The collapse of several US banks early in 2023 likely also kept many investors in “wait and see” mode during H1’23.
According to the H1’23 edition of KPMG’s
Pulse of Fintech, a number of sectors attracted robust funding during the first half of 2023. Globally, supply chain and logistics-focused fintechs attracted US$8.2 billion in funding in H1’23—well above the space’s 2019 annual record of US$5.5 billion. Green fintech also had robust interest, with US$1.7 billion of funding during H1’23— already slightly ahead of its 2022 results (US$1.5 billion).
At a regional level, the Americas saw fintech funding grow—from US$28.9 billion to US$36.1 billion between H2’22 and H1’23—despite a decline in deals volume—from 1,323 to 1,011 deals—over the same timeframe. In the EMEA region, fintech funding dropped by more than 50%, falling from US$27.3 billion across 963 deals in H2’22 to US$11.2 billion across 702 deals in H1’23. Fintech funding also dropped in the ASPAC region—from US$6.8 billion across 583 deals in H2’22 to US$5.1 billion across 432 deals in H1’23. Among the top 10 fintech deals in Asia Pacific in H1’23 were (i) US$270 million raised by Singapore-based credit services firm Kredivo Holdings and (ii) US$105 million raised by Trusting Social, a Singapore-based consumer finance.
Singapore attracts artificial intelligence funding of US$129 million
In Singapore, artificial intelligence (AI) and machine learning funding attracted six deals amounting to US$129 million in H1’23, signifying an early growth of application in generative AI particularly in the areas of cybersecurity, insurtech and wealthtech.
Similar to H1’22 and H1’21 trends, Singapore’s top funded fintech sectors were payments (US$119.6 million across 8 deals) and crypto (US$234.7 million across 36 deals) in the first half of 2023. In the payment space, Singapore-based Thunes raised the largest round in the ASPAC region, amounting to US$60 million.
Within the crypto space globally, Singapore has gained prominence among investors and startups as a strong forerunner. This comes as the nation has in place regulations such as the Payment Services Act and Digital Token Payment Act and is in the process of issuing regulations related to stablecoin issuance.
“It is still very early days when it comes to the application of generative AI to use cases in financial services,”
said Anton Ruddenklau, Global Fintech Leader at KPMG. “But looking forward, it is an area that is attracting enormous interest and funding—particularly in areas like cybersecurity, regtech, and wealthtech. Over the next six months, we’ll start to see an uptick in investors embracing the space as corporates demand ways to leverage generative AI effectively.”
Payments, crypto and AI among well-funded fintech in Singapore
In Singapore, investors embraced payments, crypto as well as artificial intelligence and machine learning deals, making these verticals the top three most funded fintech space. (see Figure 2). While the interest rate environment remains high, investors have a keen eye on the potential of AI-linked application for payments and crypto as these AI projects can help solve problems and bring in solid returns. This indicates a strong vote of confidence in this space which has driven fintechs to continue to be nimble during the current economic environment, adjust burn rates and extend funding pathways.
|
H1’23 |
H2’22 |
|||
|
Deal size
US$ (Millions) |
No. of Deals |
Deal Size
US$ (Millions) |
No. of Deals |
|
|
Reg Tech |
$1 |
3 |
$31.60 |
4 |
|
Insur Tech |
$1 |
1 |
$347.40 |
4 |
|
Wealth Tech |
$27 |
1 |
$300 |
1 |
|
Proptech |
$4 |
2 |
$12.40 |
3 |
|
Cybersecurity |
$1 |
2 |
$2.20 |
2 |
|
Payments |
$120 |
8 |
$32.70 |
3 |
|
Crypto |
$235 |
36 |
$584.80 |
23 |
|
AI & ML deals |
$129 |
6 |
||
Figure 2: Singapore’s fintech deal values and volume for H1 2023 to H2 2022
Amid economic headwinds and increased market volatility, consolidation was a key factor driving funding activity in the payment space. During H1’23, a number of fintechs embraced acquisitions in order to scale and grow their reach. During 2021 and much of 2022, global investors in the payments space embraced a broad range of payments solutions and opportunities — with Buy Now Pay Later (BNPL) companies accounting for many of the largest deals. In H1’23, this focus shifted significantly, with many investors shifting their attention back to fintechs with core payments processing capabilities and robust business models.
The crypto and blockchain space saw global investors pulling back in the wake of growing economic uncertainty, including ongoing concerns about a potential recession, high interest rates, and the significant pressure on valuations. The collapse of several crypto-focused companies during 2022 also significantly affected investor confidence; the subsequent increasing focus on due diligence and governance likely slowed the speed of crypto deals even further. As interest in crypto remained soft, interest in other solutions leveraging blockchain-based technologies continued to attract interest from investors. In particular, investors have shown continued interest in blockchain-based solutions related to the tracking and tracing of carbon credits, and the traceability of food from farm-to-table.
“It wasn’t a surprise to see fintech funding decline in the first six months of 2023, given the enormous headwinds pressuring the market at the moment,”
said Judd Caplain, Global Head of Financial Services at KPMG. “But 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.”
Global Key Highlights
- Global funding in fintech dropped from US$63.2 billion across 2,885 deals in H2’22 to US$52.4 billion across 2,153 deals in H1’23.
- The Americas attracted US$36.1 billion in fintech funding across 1,011 deals in H1’23—of which the US accounted for US$34.9 billion across 809 deals. The EMEA region attracted US$11.2 billion across 702 deals, while the ASPAC region attracted US$5.1 billion across 432 deals.
- Global VC funding declined from US$28.3 billion in H2’22 to US$27.3 billion in H1’23. The Americas attracted US$16 billion in funding during H1’23—of which the US accounted for US$15.1 billion, while EMEA attracted US$6.6 billion in VC funding, and the ASPAC region saw US$4.6 billion.
- Global M&A activity was quite soft in H1’23, with only US$24 billion in deal value, including US$19.3 billion in the Americas (US$19.2 billion in the US), US$4.3 billion in the EMEA region, and US$460 million in the ASPAC region.
- Global PE funding was also very soft with US$1.1 billion in funding in H1’23, including US$768 million in the Americas (US$627 million in the US), US$279.5 million in the EMEA region, and US$60.5 million in the ASPAC region.
- Corporate-participating funding accounted for US$16.7 billion in funding during H1’23, including US$10.8 billion in the Americas (US$10.4 billion in the US), US$3.1 billion in the ASPAC region, and US$2.7 billion in the EMEA region.
- Payments accounted for US$16.2 billion of funding in H1’23, while artificial intelligence and machine learning focused fintech attracted US$8.8 billion, supply chain and logistics focused fintech attracted US$8.2 billion, and insurtech attracted US$4.7 billion.
1. The US accounts for more than two-thirds of H1’23 fintech funding
The US took the lion’s share of fintech funding in H1’23, its US$34.9 billion in funding accounting for more than two-thirds of the US$52.4 seen globally. The US also attracted five of the seven US$1 billion+ fintech deals of H1’23, including the US$8 billion buyout of Coupa by Thomas Bravo, the US$6.9 billion VC raise by Stripe, the US$4 billion acquisition of EVO payments by Global Payments, the US$2.6 billion buyout of Duck Creek Technologies by Vista Equity Partners, and the US$1.8 billion buyout of Moneygram by Madison Dearborn Partners LLC. The EMEA region and ASPAC regions each attracted a single US$1 billion+ deal during H1’23; in EMEA, UK-based Wood Mackenzie was acquired by Veritas Capital for US$3.1 billion, while in ASPAC, China-based Chongqing Ant Consumer Finance held a US$1.5 billion VC funding round.
2. EMEA region sees falls more than 50 percent in funding between H2’22 and H1’23
Total fintech funding in the EMEA region was just US$11 billion in H1’23—less than half the US$27 billion seen in H2’22. The UK attracted over half of this amount (US$6 billion), including the US$3.1 billion buyout of Wood Mackenzie by Veritas, a US$602 million raise by AI-powered lending company Abound, and a US$250 million raise by e-trading platform eToro. While other countries in the region lagged far behind the UK’s results, several countries attracted deals over US$250 million, including France (Ledger—US$493 million), Switzerland (Teylor—US$299 million; Metaco—US$250 million), and Mauritius (Bold Prime—US$250 million).
3. ASPAC sees fintech funding decline to US$5.1 billion in H1’23
Fintech funding in the ASPAC region dropped from US$6.8 billion in H2’22 to US$5.1 billion in H1’23—a far cry from the record-breaking six months experienced in H1’22 when fintech funding reached over US$45 billion. The largest fintech deal in the ASPAC region during H1’23 was US$1.5 billion raise by China-based consumer finance services company Chongqing Ant Consumer Finance. Other deals in the region during the quarter were significantly smaller, including the US$304 million buyout of India-based SME lending company Vistaar Finance by PE firm Warburg Pincus, the US$270 million raise by Singapore-based credit services firm Kredivo Holdings, and a US$200 million raise by India-based digital lending platform Creditbee.
4. Payments remains top fintech subsector with US$16 billion in funding in H1’23
Payments continued to attract a large share of fintech funding globally during H1’23, accounting for US$16.2 billion in funding, including the three largest deals of the quarter—the US$8 billion buyout of Coupa by Thomas Bravo, the US$6.9 billion VC raise by Stripe, and the US$4 billion acquisition of EVO payments by Global Payments.
5. Supply chain and logistics and green fintech buck downward trends
In H1’23, a number of growing fintech subsectors bucked downward trends, showing resilience and the ability to retain interest and funding despite current market challenges. In particular, supply chain and logistics-focused fintechs accounted for US$8.2 billion of fintech funding in H1’23—a record annual high with six months left in 2023. Green fintech attracted US$1.7 billion in funding during H1’23—already ahead of the sector’s 2022’s total results. Other sectors that saw strong funding in H1’23 included insurtech (US$4.7 billion) and B2B fintech (US$3.7 billion).
6. In an uncertain future, AI is expected to make big gains
With no end to many of the geopolitical and macroeconomic uncertainties in sight, fintech funding in H2’23 is expected to remain relatively soft—although if the market stabilizes, fintech funding could start to see a cautious rebound. One area well-positioned to see a strong uptick in interest from investors in H2’23 is artificial intelligence—and generative AI, in particular—as companies around the world look to leverage AI’s full potential as part of efforts to improve both operational efficiencies and customer value.
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