Fintech
startups in the United States and the United Kingdom saw funding decline
significantly in 2023 compared to the previous year, according to the newest
report by Tracxn. The total funding into US fintech startups fell 36% to $18.2
billion in 2023 while in the UK market, the slump was even more visible; local
companies raised $4.2 billion, representing a plunge of 63% from the $11.2 billion
secured in 2022.
In 2023,
the US fintech industry, despite being the most funded globally, experienced a
significant downturn in investment. The sector’s total funding plummeted to
$18.2 billion, a decline of 36% from the previous year’s $28.5 billion. This trend
was emphasized by a strong decrease in the number of large funding
rounds, with only 19 rounds exceeding $100 million, compared to 70 in 2022.
“With
inflation, increased interest rates, geopolitical issues, and other
macroeconomic conditions, activity across industries has been slow, making it
challenging for the investment market,” the report commented.
Amidst
these challenges, the US market still saw the emergence of four new unicorns
and a total of 172 acquisitions, albeit a decrease from previous years. San
Francisco remained the epicenter of fintech funding, leading in city-wise
investments. Notably, the payments , investment technology, and finance &
accounting technology segments emerged as the top performers despite the
overall funding slump.
The UK Fintech Sector
Faces Second Year of Declining Investments
Following
the US, the UK fintech sector witnessed a downturn, ranking second
globally in fintech funding for 2023. The total investment dropped to $4.2
billion, a significant fall from $11.2 billion in the preceding year. This
reduction reflects broader macroeconomic challenges impacting investor confidence, such as rising interest rates and inflation.
Source: Tracxn
The
declines in the two largest economies regarding fintech startups continue the
unfavorable trend observed a year earlier. At the beginning of 2023, Finance
Magnates reported that global fintech funding had shrunk 30% in 2022 to $95
billion. Fintech companies fared significantly worse during this period than
financial or technology firms.
“The drop
in funding is primarily due to a downward move in late-stage and early-stage
funding. The sector attracted late-stage investments worth $2.7 billion in
2023, 60% lower than the $6.8 billion raised in 2022,” the report added.
Source: Tracxn
The UK’s
fintech landscape, particularly in London, remains vibrant, albeit with reduced
funding. Moreover, the UK fintech ecosystem introduced two new
unicorns, and London continued to dominate the country’s fintech investment
scene.
Bucking the
adverse trends, the British payment startup SumUp managed to raise $306 million
in a financing round finalized in November. As a result, the company is
currently valued at nearly $9 billion. This high valuation was achieved when the EMEA region’s fintech sector recorded a decline of 50%.
Fintech Industry Outlook
The
investment trends in both the US and UK fintech sectors highlight the impact of
global economic pressures. While the US fintech sector’s decline was less steep
than the UK’s, both markets experienced a significant contraction in funding
activities. The emergence of new unicorns and sustained interest in specific
segments like payment technologies indicate resilience and potential areas for
growth.
These
trends suggest a cautious outlook for fintech investments in 2024, with
potential shifts in investor focus towards segments demonstrating resilience
and innovation amidst economic challenges. Government initiatives, particularly
in the UK, aim to bolster the fintech ecosystem, indicating a proactive
approach to supporting this key industry in turbulent times.
“In 2023,
quarterly funding for the UK fintech startup ecosystem experienced a steady
decline from Q1 to Q3, reaching its lowest point in Q3 at $410 million, marking
the least funded quarter since 2019,” the report concluded.
Fintech
startups in the United States and the United Kingdom saw funding decline
significantly in 2023 compared to the previous year, according to the newest
report by Tracxn. The total funding into US fintech startups fell 36% to $18.2
billion in 2023 while in the UK market, the slump was even more visible; local
companies raised $4.2 billion, representing a plunge of 63% from the $11.2 billion
secured in 2022.
In 2023,
the US fintech industry, despite being the most funded globally, experienced a
significant downturn in investment. The sector’s total funding plummeted to
$18.2 billion, a decline of 36% from the previous year’s $28.5 billion. This trend
was emphasized by a strong decrease in the number of large funding
rounds, with only 19 rounds exceeding $100 million, compared to 70 in 2022.
“With
inflation, increased interest rates, geopolitical issues, and other
macroeconomic conditions, activity across industries has been slow, making it
challenging for the investment market,” the report commented.
Amidst
these challenges, the US market still saw the emergence of four new unicorns
and a total of 172 acquisitions, albeit a decrease from previous years. San
Francisco remained the epicenter of fintech funding, leading in city-wise
investments. Notably, the payments , investment technology, and finance &
accounting technology segments emerged as the top performers despite the
overall funding slump.
The UK Fintech Sector
Faces Second Year of Declining Investments
Following
the US, the UK fintech sector witnessed a downturn, ranking second
globally in fintech funding for 2023. The total investment dropped to $4.2
billion, a significant fall from $11.2 billion in the preceding year. This
reduction reflects broader macroeconomic challenges impacting investor confidence, such as rising interest rates and inflation.
Source: Tracxn
The
declines in the two largest economies regarding fintech startups continue the
unfavorable trend observed a year earlier. At the beginning of 2023, Finance
Magnates reported that global fintech funding had shrunk 30% in 2022 to $95
billion. Fintech companies fared significantly worse during this period than
financial or technology firms.
“The drop
in funding is primarily due to a downward move in late-stage and early-stage
funding. The sector attracted late-stage investments worth $2.7 billion in
2023, 60% lower than the $6.8 billion raised in 2022,” the report added.
Source: Tracxn
The UK’s
fintech landscape, particularly in London, remains vibrant, albeit with reduced
funding. Moreover, the UK fintech ecosystem introduced two new
unicorns, and London continued to dominate the country’s fintech investment
scene.
Bucking the
adverse trends, the British payment startup SumUp managed to raise $306 million
in a financing round finalized in November. As a result, the company is
currently valued at nearly $9 billion. This high valuation was achieved when the EMEA region’s fintech sector recorded a decline of 50%.
Fintech Industry Outlook
The
investment trends in both the US and UK fintech sectors highlight the impact of
global economic pressures. While the US fintech sector’s decline was less steep
than the UK’s, both markets experienced a significant contraction in funding
activities. The emergence of new unicorns and sustained interest in specific
segments like payment technologies indicate resilience and potential areas for
growth.
These
trends suggest a cautious outlook for fintech investments in 2024, with
potential shifts in investor focus towards segments demonstrating resilience
and innovation amidst economic challenges. Government initiatives, particularly
in the UK, aim to bolster the fintech ecosystem, indicating a proactive
approach to supporting this key industry in turbulent times.
“In 2023,
quarterly funding for the UK fintech startup ecosystem experienced a steady
decline from Q1 to Q3, reaching its lowest point in Q3 at $410 million, marking
the least funded quarter since 2019,” the report concluded.
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- Source: https://www.financemagnates.com//fintech/the-great-fintech-slowdown-us-and-uks-funding-struggle-in-2023/
