KPMG's bi-annual Pulse of Fintech report paints a sorry picture for the global fintech sector in H2'24 as both fintech investment and the number of deals fell to levels not seen since 2017.
The past 12 months has been another difficult year for fintech, with just $95.6 billion of investment globally across 4,639 deals.
A perfect storm of factors combined to soften investor appetite, including macroeconomic challenges, geopolitical conflicts and tensions, a year of elections in major jurisdictions, and concerns about valuations and the lack of exits.
The second half of the year was notably slower than the first, with investment falling from $51.7 billion in H1’24 to $43.9 billion in H2’24. A closer look at the results offered some optimism, however; between Q3’24 and Q4’24, global fintech investment rose from $18 billion to $25.9 billion. Both M&A deal value and VC investment also rose quarter-over-quarter, from $7.4 billion to $14.2 billion and from $9.7 billion to $11.2 billion, respectively.
Regionally, the Americas attracted the largest share of fintech investment in 2024 — $63.8 billion across 2,267 deals, including $50.7 billion across 1,836 deals in the US. The Emea region attracted $20.3 billion across 1,465 deals, while the Apac region saw $11.4 billion across 896 deals. At a sector level, the payments space attracted the largest share of investment ($31 billion), followed by digital assets and currencies ($9.1 billion), and regtech ($7.4 billion).
“It’s been a rough year for nearly everyone — fintechs, corporates, VC and PE firms—given the breadth of challenges and uncertainties in the global market. With only a handful of exceptions, no one wanted to pull the trigger on the largest deals — which have long been a mainstay in fintech investment,” says Karim Haji, global head of financial services, KPMG International. “But there’s a lot to be positive about heading into 2025. Many critical elections are behind us and investment and deal activity is beginning to pick up. We are starting to see more deals coming through because of interest rate cuts in different jurisdictions and the lower cost of funding. However, we will have to wait and see if the changing world trading conditions impact inflation, interest rates and consequently these positive signs of market change.”
While the payments space will likely remain the biggest ticket of investment globally, digital assets and currencies are well positioned for an upswing in investment states the report — particularly when it comes to market infrastructure, digital tokenization, and stablecoins. AI is also expected to remain a key priority for investors, with regtech and cybersecurity likely to see the most interest in H1’25.
“If what we’ve seen in the broader investment space is any indication, AI could be a sleeping giant for fintech investment,” says Anton Ruddenklau, lead of global innovation and fintech, financial services, KPMG International. “However, right now, it’s still very early days. There’s definitely a lot of interest in AI, generative AI, agentic AI and automation, but there’s a lot of caution too. Over the next year, AI-focused regtechs will likely see the most traction among investors as financial services companies look for better ways to respond to the increasingly complex regulatory environment.