KPMG’s bi-annual report, “Pulse of Fintech H2’23”, reveals a significant slowdown in global fintech investment. Investment fell from $196.6bn across 7,515 deals in 2022 to $113.7bn across 4,547 deals in 2023. This decline is attributed to a combination of factors, including geopolitical events, rising interest rates, and a scarcity of successful exits for previously funded companies.
EMEA Market Sees Sharp Decline, but Geographic Diversity Emerges
Mirroring the global trend, the Europe, Middle East, and Africa (EMEA) region experienced a seven-year low in fintech investment, dropping from $49.6bn across 2,478 deals in 2022 to $24.5bn across 1,514 deals in 2023. However, the region boasts remarkable geographic diversification, with fintechs from seven different countries making the top ten deals. Notable examples include Tabby ($950m) and Haqqex ($400m) from the United Arab Emirates.
Kuwait’s Fintech Sector: Catching Up and Carving a Niche
Commenting on the outlook for Kuwait, Ankul Aggarwal, Partner and Head of Deal Advisory at KPMG Kuwait, highlights the country’s rapidly growing fintech sector. He emphasizes the increasing number of participants, including digital payments facilitators, insurtech companies, and peer-to-peer (P2P) platforms. Additionally, he acknowledges the Central Bank of Kuwait’s (CBK) efforts in creating a supportive environment for innovation through initiatives like updated e-payment regulations, digital banking guidelines, and an open banking framework.
EMEA: Key Trends for H1’24
The report identifies several key trends for the EMEA region in the first half of 2024:
- Growing focus on embedded finance and banking offerings.
- Adoption of the Buy Now Pay Later (BNPL) model, with potential consolidation in the space.
- Increased interest in asset tokenization.
- Rise of artificial intelligence (AI) solutions for fraud prevention and customer service.
Aggarwal further notes that Kuwaiti fintech companies are primarily targeting the unbanked and underbanked segments, offering solutions specific to their needs. Meanwhile, traditional banks are shifting towards adopting value-added solutions with a focus on embedded finance and banking offerings.
Sectoral Trends: Proptech and ESG on the Rise
Globally, proptech (property technology) witnessed a record-breaking investment of $13.4bn in 2023. Similarly, ESG (environmental, social, and governance) fintech saw investment double year-on-year to $2.3bn, making 2023 the second-best year ever for the sector. Given the growing focus on sustainability and regulatory changes, the report predicts continued growth in ESG-focused fintech solutions throughout 2024.
While AI-driven fintech companies attracted $12.1bn in investment in 2023, this figure represents a decline from $28.1bn in 2022. However, the report suggests that this decline does not reflect diminished investor interest. Instead, it highlights a shift towards implementing AI through strategic partnerships and product development rather than direct investment.
Other Key Findings:
- The Americas attracted $78.3bn across 2,136 deals in 2023, the US alone accounting for $73.5bn and 1,734 deals.
- Global M&A deal value dropped from $98.2bn in 2022 to $56.4bn in 2023, with global VC (venture capital) investment declining from $88.8bn to $46.3bn year-over-year. While VC investment declined, private equity (PE) growth investment showed resilience, rising from $9.6bn in 2022 to $11bn in 2023.
- Payments remained the leading sector for fintech investment globally in 2023, attracting $20.7bn compared to $58bn in 2022. Other notable sectors included proptech ($13.4bn), insurtech ($8.1bn), crypto and blockchain ($7.5bn), regtech (regulatory technology) ($2.6bn), ESG fintech ($2.3bn), and cybersecurity ($1.3bn).
- Corporate-participating VC investment globally fell from $$45.9 bn in 2022 to $25.2bn in 2023.
