The fintech industry experienced a significant dip in investment in 2022, with global fintech investment dropping by over 30% from the previous year’s record high, according to KPMG’s annual Pulse of FinTech report.
The total investment in fintech amounted to US$164.1bn, down from US$238.9bn in 2021. The number of deals also fell from 7,321 to 6,006.
However, despite the decline, it was still the third-best year in fintech history for investment, and the second-best for dealmaking.
Regtech Offers a Beacon of Hope
While the investment figures may seem negative, regtech appears to offer a beacon of hope for the industry.
Regtech firms experienced record investment of US$18.6bn, up more than 50% on the prior year.
As regulators pay closer attention to the fintech industry, KPMG predicts that the regtech sector will continue to grow in the next 12 months.
Turbulent Year Puts Dampeners on Crypto Space
On the other hand, the crypto space experienced a drop in investment as the market soured on the Terra (Luna) crash in May and the FTX bankruptcy in November.
Investment in blockchain and cryptocurrencies fell from US$30bn in 2021 to US$23bn last year, with only 1,500 deals recorded compared to 1,800 the year before.
However, despite the dip in investment, the technical development and adoption of blockchain and crypto assets continue to show promise.
US Dominates but Large Deals Fall Away
The US continues to account for the largest share of fintech investment, attracting over US$60bn across 2,222 deals in 2022.
Investment across the Americas as a whole, however, dipped from US$108.9bn in 2021 to US$68.6bn in 2022.
Asia-Pacific recorded a slight record high level of fintech investment last year, rising from US$50.2bn to US$50.5bn, while fintech investment in EMEA dropped from US$79bn to US$44.9bn.
Outlook for 2023
KPMG predicts that 2023 will see fewer large deals, with transactions valued at over US$10bn described as “relatively low”.
Despite the investment dip, Anton Ruddenklau, Global Fintech Leader at KPMG International, characterizes 2022 as “not a bad year for fintech by any means”. He notes that total investment was still the third-highest ever, and the number of fintech deals came second only to 2021’s record high.
Ruddenklau also highlights that regtech experienced significant growth year-over-year due to its mission-critical nature.
Although fintech investment experienced a dip in 2022, the regtech sector offers a positive outlook as regulators increasingly focus on the industry.
The development and adoption of blockchain and crypto assets also show promise despite the decline in investment.
While large deals may be less likely in 2023, the overall investment in fintech is still among the highest ever, and the industry remains resilient.