Interested in becoming an Innovate Finance member?

Enquire
  
now! Become a sponsor  login
ABOUT PROGRAMMES BECOME
US MEMBERSHIP & INITIATIVES EVENTS INSIGHTS A
MEMBER

FinTech Investment Landscape

2023
After a challenging economic slowdown throughout 2022, global FinTech
entered 2023 on cautious footing as economists and investors warned that
ongoing macroeconomic tumults including lingering inflation, hawkish
monetary policies, supply chain problems, and a potential recession would
continue to dampen discretionary spending and dealmaking.
Global fintech investment dropped by a steep 48% in 2023 compared to
2022, with $51.2 billion dollars invested into the sector across 3,973 deals
from Seed through Series I. The venture market has entered the thick of a
challenging, non-linear post-COVID recovery, as outlined in the Innovate
Finance 2023 Half Year report.

Globally, early stage fintech investment remains strong, with seed rounds
securing over $4 billion in 2023 despite headwinds, while later stage mega-
deals ($100 million and above) are easing, suggesting lower growth-stage
valuations and possibly a reluctance to issue new capital in this market
environment. The average deal size fell to $12.9 million from $15.5 million in
2022, although it is still higher than the average of $10.3 million recorded
from 2012 - 2020. Notably, FinTech has once again demonstrated its global
reach and the pace of change internationally. For the first time, Asian
countries in the Top 10 delivered more investment than European countries
in the Top 10. The US is still leading the global ranking in 1st place, followed by
the UK in 2nd place and with India in 3rd place. Moreover, the Top 5 largest
deals of 2023 took place across the US, UK, India and UAE.

The US took the lion’s share of deals with $24.2 billion invested across 1,530
deals, a 44% decrease from 2022. This included Stripe’s $6.9 billion deal in H1
2023, without which the US would have fallen 60% year-on-year. The UK
reported $5.1 billion across 409 deals (a 65% drop from 2022) yet well
outpacing third place India which brought in $2.5 billion across 187 deals,
also down 63% on 2022.

Despite a significant slowdown in venture capital investment in the vast

majority of the globe, there are some indicators of recovery that position key
markets for a stronger 2024 from the second half of the year onward. In this
report, Innovate Finance dives into a granular analysis of the current health
of FinTech and examines the emerging trends in investment and innovation.

“The industry must also bear in mind that “most of the “tourist” capital has
left the market leaving an opportunity on the supply side for those with
conviction to invest. In the near term this may lead to currently funded
companies with weaker investor syndicates and uncertainty about ongoing
support from the existing capital base,” says Jay Wilson, Partner at Albion
VC.

Global Overview

Global investment in FinTech reached $51.2 billion across 3,973 deals in 2023,
a steep drop from $99 billion in 2022. Deal count also declined 38%, whilst
the average deal size remains strong at $12.9 million, an indicator of investor
confidence in the FinTech industry.

Furthermore, while the total of global investment in FinTech represents a

decline from the previous two years, it is 10% higher than the last pre-covid
year of 2019 (investment in UK FinTech in 2023 was 11% higher than in 2019).
Q2 and Q3 2023 reported circa $10 billion each of investment, the lowest
since early 2020, although Q4 2023 saw a quarter-on-quarter increase of
c.13%, the first notable increase since Q3 2021 (excluding the impact of the
Stripe deal in Q1 2023).

But what does the data say about both founder and investor behaviour?

“Macro uncertainty meant that any company that has the option to defer
fundraising”, says Tim Levene, CEO of Augmentum, “through runway
extension either by cutting costs, rising bridge funding, or both - chose that
route. The stabilisation of interest rates in Q3 and Q4 marked the first sign of
a shift in market sentiment towards a more positive outlook. Rates are
expected to remain elevated through 2024 and it will undoubtedly be a
challenging year on many fronts, but with confidence starting to return to
public and private markets we look forward to a return in investment
activity.”

While macroeconomic uncertainty persists, pockets of seed stage resilience

hint at ongoing innovation amid adversity, with 17% of total funding, higher
than pre-Covid levels. Though allocation of funding is more selective,
sustained activity into promising ventures might indicate a self-correction of
markets towards realistic longer-term growth.

Global FinTech Investment

Capital invested and number of deals, 2012–2023
Deal Count Capital Invested

150,000 8000

6000
100,000

4000

50,000

2000

0
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

A Flourish chart

Across Investment Stages

Investment Across series is distributed as follows:

No. of deals % $ value of deals %

Seed 67% 17%

Series A 19% 23%

Series B 8% 21%

Series C 3% 17%
 Series D 2% 18%

Series E 1% 4%

Despite a large deal volume occurring at seed stage (67%), significantly

more capital has been invested across Series A and B, targeting FinTechs
with proof of revenue and ready to scale.

The 2023 distribution is in line with 2022 although the last few years through
the Covid pandemic have seen a skew in the proportion of Seed stage deals,
due in part to reduced funding of later stage deals. Later stage Series C
through E represent a small portion of deal volume (6% of all global deals in
2023) but point to continued availability of growth capital for a small cohort
of well regarded businesses.

Megadeals Across Verticals

 Xpansiv

Ledger St
Rapyd
BharatPe

A Flourish bubble chart

The Top 5 Largest Deals of 2023 were:

Stripe at $6.9bn (Payments, based in the US)
Rapyd at $950m (Payments, based in the UK)
Xpansiv at $700m (Commodity trading, based in the US)
BharatPe $520m (Payments, based in India)
Ledger $493m (cryptocurrency services, based in France)

It is interesting to note that Payments platforms were able to close the

largest capital raises in 2023, reflecting the excitement and confidence of
investors in this sector.

Top 10 Global Markets

 A Flourish bubble chart

United States: 1,530 deals, $24.2 billion

United Kingdom: 409 deals, $5.1 billion
India: 187 deals, $2.5 billion
Singapore: 176 deals, $2.2 billion
China: 76 deals, $1.8 billion
United Arab Emirates: 54 deals, $1.3 billion
France: 97 deals, $1.2 billion
Germany: 86 deals, $1.1 million
Hong Kong: 41 deals, $912 million
Canada: 92 deals, $884 million

In 2023, global FinTech witnessed a broad international distribution of capital

that underscores the dynamic and widespread nature of FinTech
developments across the globe, with the United States as the leading
FinTech market, followed by the United Kingdom, India, and other notable
players. 2023 has also seen Hong Kong appear in the Top 10 for the first time
with $913 million invested across 41 deals for a high average deal size of $22
million.
This is also the first time the United Arab Emirates makes the Top 10, with $1.3
billion invested across 54 deals. While these results appear modest
compared to the major investment pulled in by the US and UK, it marks an
exponential jump for the UAE compared to 2022.

“Part of this growth,” cites Tim Levene, CEO at Augmentum, “ is a ‘catch-up’

phenomenon as propositions such as digital banking reach these markets
for the first time, but there are also cases of ‘leap-frogging’ for example with
digital wallet adoption in APAC for payments and identity far ahead of
Europe.”

Levene also adds that this type of international growth presents

“[opportunities] for established UK and US fintechs is in providing
infrastructure to support the digital transformation in these markets - as
we’ve seen in Europe, the response from incumbent’s to rising competitive
pressures from fintechs is to increase their spending on digital
transformation, creating the significant opportunity that underpins the rise
or B2B fintech.”

Most Top 10 countries experienced decreases of c.60% in 2023 versus 2022:

India recorded $2.5 billion of investment, a fall of 63%, Singapore a fall of 41%,
France a fall of 56% and Germany a fall of 66%.

Regardless of individual market fluctuations, says James Codling, Managing

Partner Volution VC, “the trend of Fintech” globalising is a continuing
validation that this industry is a significant part of the new economic
zeitgeist rather than a temporary phenomenon.”

Steve Lemon, Partner at Volution VC adds that, “Both Singapore and the UAE
have demonstrated a commitment to creating a supportive environment for
FinTech, suggesting that while the rate of growth may normalise, the upward
trajectory is likely to continue.
For UK and US Fintechs, the vigorous expansion in these regions presents
significant opportunities, for example, through partnerships or direct
investments, bringing expertise in regulatory technology, analytics, and
cross-border payments to regions eager for innovation and international
collaboration.”

Across Europe

In Europe, a slight reshuffle has taken place in its own Top 10 Rankings.
Europe - excluding the UK - saw a total $4.4 bn invested into its FinTech
sector with the UK leading the pack in Europe with $5.1 billion.

Says Shawn Atkinson, Tech Partner at Orrick: “This is further evidence of

London’s continued pre-eminance as a centre of innovation and global
finance [and[ the ability of the City of London to attract the best and
brightest minds from around the globe and foster their development.”

Capital Across Deals for Euro Top 10

(2023):
 A Flourish bubble chart

United Kingdom: $5.1 billion (409 deals)

France: $1.2 billion (97 deals)
Germany: $1.1 billion (86 deals)
Switzerland: $594 million (76 deals)
Netherlands: $261 million (39 deals)
Spain: $242 million (54 deals)
Sweden: $200 million (36 deals)
Denmark: $106 million (20 deals)
Italy: $102 million (31 deals)
Belgium: $95 million (9 deals)

The UK, France and Germany hold down their spots in the Top 3 and the UK
outpaces the continent by a significant margin, securing more capital than
the next 28 European countries combined.
Rising star Spain maintains a position in the Top 10 for a second year,
jumping from 7th in 2022 to 6th this year– and beating stalwarts Denmark
and Sweden.

The UK Landscape

As a major player on the global arena, the UK – like the US – has witnessed
investment fluctuations that fall in line with macroeconomic conditions.

The UK attracted $5.1 billion across 409 deals in 2023, a significant drop from
$14.6 billion in 2022. However, the average UK deal size for 2023 sits at $12.5
million, well ahead of all years up to 2020. The Covid periods of 2021 and first
half of 2022 saw some well documented market froth before the fall in
investment over the last 18 months, but 2023 proved challenging. 2023
finished with a well-received $122 million capital raise for Atom Bank, and
market talk of potential investment in Monzo by Alphabet’s investment arm.
These may be signs that the market is now getting back on track. London
continues to be a leading global FinTech investment hub with $4.5 billion
received in 2023, down 56% from 2022.

Tim Levene, CEO at Augmentum adds some context: “The UK remains the
leading European market for fintech and we expect this to remain the case
in 2024. The powerful foundations of talent, regulation and capital have
driven the development of a resilient and diverse fintech ecosystem. Fintech
hubs across Europe - Stockholm, Berlin, Paris, Tallinn - continue to mature,
but scaling an ecosystem takes many years and the UK remains ahead.”

The UK also remains an attractive landing destination for FinTechs

expanding globally from APAC and Australasia, with some funds like
Australia-New Zealand founded 1835i directing their origination strategies
towards the UK.

Nicole Anderson, Venture Partner, says: “[We] source globally but our base in
the UK is justified by the fact that the UK represents the #1 market for
expansion making up 12% of Australian / NZ FinTechs.”
The figures for 2023 show a more diverse investment landscape similar to
the global distribution of venture across series, with Seed deals comprising
the majority of the deals but with significantly more capital allocated
towards Series A and B ventures.

There were no deals across Series F-G in 2023, compared to 3 such deals in
2022 (for a total $932 million), which combined with Stripe’s move towards
the US suggests that the UK continues to face challenges in securing growth
capital for its FinTech sector.

Jay Wilson, Partner at Albion VC, says: “While high level governmental
support for UK FinTech remains strong (e.g. CFIT), on the ground FinTechs are
finding it hard to navigate regulatory permissions (this is in line with an
adjustment to the FCAs position of FinTechs).”
 UK FinTech Investment
Capital invested and number of deals, 2012–2023
Deal Count Capital Invested

15,000 1000

800

10,000

600

5000 400

200

0
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

A Flourish chart

Female Founders

Female founders in UK FinTech see a few bright spots. Through the Pitchbook
database Innovate Finance was able to identify 246 female executives who
are either co-founders or the CEO of a UK FinTech company.

Across the data analysed, we identified 59 deals that took place this year
netting $536 million dollars deployed into female-led FinTechs. This $536
million deployed to female driven fintech represents 10.5% of the UK total of
$5.1 billion dollars, a step forward for women founders/leaders.
The last time the UK saw this representation of female driven FinTech was
2021, with $1.1 billion allocated to female founders/leaders.

“The fact that this year’s [level of investment] includes several Series B and C
deals for companies with female co-founders who have secured significant
funding is promising,” says Nina Foote, Partner and Head of Growth at
Volution VC. “ However, there is a persistent challenge in achieving gender
parity, particularly for women leading on their own.

Initiatives like mentorship for underrepresented founders, commitment to

the Investing in Women Code, and membership in EU Women in VC are
steps towards building a more inclusive environment. Additionally, the focus
of VCs on investing in women and Limited Partners (LPs) seeking diverse
fund investment strategies is a positive trend, yet there's still significant work
to be done.

In 2023, we see the capital allocated to female-led and co-founded

FinTechs was distributed across a larger number of growth stage
businesses, including Quantexa ($129 million), Blockchain.com ($110 million)
TapTap Send ($65 million), and Superscript ($54 million), each rising above
a $50 million investment threshold.

The majority of 2023’s capital into female-driven fintech went to startups

with a woman on a co-founding team. While this marks a departure from
2021’s boom year for sole female founders, this new distribution represents
increasing diversity in FinTech C-suites.

Tim Levene, CEO at Augmentum, adds: “There is a wealth of female

leadership talent in fintech as reflected in increasingly diverse c-suite and
board composition. In time this will flow through into greater diversity in
founding teams as the powerful operator-to-founder flywheel cycle plays
out from more of Europe’s leading fintech companies.”

US Overview
The world’s largest FinTech market faces a few challenges and triumphs of
its own. US FinTech raked in $24.2 billion in 2023, a whopping 47% of the
global total, and an average deal size of $15.8 million.

Four US regions have emerged as its top FinTech markets, with few surprises
amongst the results. Californian FinTech came in at the front with $13.1 billion
invested across 412 deals. New York followed in second with $4.7 billion
invested across 339 deals. Massachusetts came third with $1.2 billion
invested across 47 deals. And Texas came in fourth with $855 million across
101 deals. Florida rounds out the Top 5 with $747 across 102 deals.

Over the past five years, New York has emerged as a leading US FinTech
market with strong investment into early stage innovation and significant
capital available for select growth deals (post Series C). Ten years ago New
York netted a humble $449 million in capital invested across 60 deals. Since
2013 New York has earned its “Silicon Alley’’ moniker, and 2023 saw an
average deal size of $14 million.

The strength of this market prompted Innovate Finance to begin operations

in New York in 2023, with further programming and engagement expected
throughout 2024 aimed at serving the burgeoning FinTech community, with
a corridor for US FinTechs into the UK and vice versa.

“The interconnectivity between London and New York Fintech has never
been stronger,” say Fin Capital Partners Henry Cashin (Investment Partner)
and Nick Daley (Investor), “ but there is still a long way to go” in terms of
recovery and potential for common growth.

Aside from their commonalities across their financial services histories,

density of institutions, and depth of domain-specific talent, Fin Capital
clarify, “Now that European expansion is more challenging, the U.S. and
specifically New York, offers a gateway into one of the world’s biggest
markets. The two regions continue to have their differences, for instance in
their approach to regulation--with arguably the UK being ahead - but these
are opportunities for founders to accelerate the adoption curve through
innovation and capture long-term value.”
Kevin Chong, Co-Head of Outward VC, adds further context: “US and UK
fintech continue to lead in deal flow and capital raising because they are
the world’s two most established ecosystems where tech expertise and
regulatory transparency combines with repeat founders who know how to
partner with VC.”

Capital Across Fintech Series in New York (2023):

Seed: 106 deals, $768.23 million
Series A: 41 deals, $619.5 million
Series B: 11 deals, $406.64 million
Series C: 1 deal, $43 million
Series D: 5 deals, $890.2 million
Series E: 1 deal, $150 million

The maturity of this market has prompted Innovate Finance to open its first
international office in New York, with further research and programming
expected into 2024 and 2025 to serve the burgeoning FinTech community.

“The interconnectivity between London and New York Fintech has never
been stronger,” say Fin Capital Partners Henry Cashin (Investment Partner)
and Nick Daley (Investor), “ but there is still a long way to go” in terms of
recovery and potential for common growth.

Aside from their commonalities across their financial services histories,

density of institutions, and depth of domain-specific talent, Fin Capital
clarify, “Now that European expansion is more challenging, the U.S. and
specifically New York, offers a gateway into one of the world’s biggest
markets. The two regions continue to have their differences, for instance in
their approach to regulation--with arguably the UK being ahead--but these
are opportunities for founders to accelerate the adoption curve through
innovation and capture long-term value. At Fin, we help build category
leading global Fintech companies, with active portfolio positions in both
geos, while enabling our portfolio companies to bridge the divide between
the U.K. and U.S. – helping them move cross-border for GTM scale, talent,
and investor access.”
Emerging Trends of 2024
When looking at the 71 megadeals (deals of over $100 million) that took
place in 2023, the three FinTech verticals attracting the most investment
cover B2B and consumer lending wi 17 mega deals and
Blockchain;payments; and insurtech tied with 9 megadeals each. The
remaining deals largely represented banking, wealth building &
management, and investing and brokerage.

Concluding Remarks & Future Gazing

The global FinTech landscape navigated a cautious start in 2023, echoing
the slowdown witnessed in 2022 amidst concerns related to inflation,
monetary policies, supply chain challenges, and the spectre of a potential
recession. What does the New Year look like?

“Going into 2024, volatility will continue to weigh on investors,” says Kevin
Chong, Co-Head at Outward VC. Chong has often commented on the
macro-environment in previous editions of the Innovate Finance Investment
Report. “ As interest rates start to fall and major elections in the US, UK and
EU (and also Taiwan) have taken place, investors will feel more confident
about doing deals….This coming phase will see leaner, more resilient start-
ups matched with leaner, more resilient investors.”

When looking at the investment trends that emerged in 2023, the FinTech
verticals attracting the most investment were Lending, Blockchain,
Payments and Insurtech. As noted above, the Payments sector stood out
among the verticals for their ability to close the largest capital raises in 2023.

It should be no surprise that payments have come out on top, according to

Nicole Anderson, Venture Partner at 1835i. “In the payments sector consumer
trends suggest there is a continued decline in cash usage, while at the same
time an increased use of mobile devices for payments, and rising
awareness of alternative payment methods.” 1835i, an Australia and New
Zealand based fund, has been an investor in Australia’s home grown
unicorn, AirWallex.
“In general, financial institutions are more cautious about buying new
technology weighing on the growth of B2B institutional FinTech vendors. This
trend is likely set to continue in the first part of 2024”, says Jay Wilson
(Partner, Albion VC).

Kevin Chong adds “As the drivers of innovation shifts from mobile and cloud
to data and AI, [we will see] the intersection of financial services and
insurance with climate, education and health.”

Despite the overall decline, the trends in the second half of 2023 point to
potentially having reached the bottom of the market. All equity markets,
private and public, have experienced a cyclical downturn in issuance over
the last 2 years, and markets usually reopen first with investors backing the
highest quality companies. The majority of investors surveyed for this report
remain bullish on payments, as well as regtech, insurtech and AI -
particularly wherever these sub-verticals offer solutions to, in Volution VC’s
words, “streamline process[es], mitigate risks, and reduce costs.”

High profile deals in the UK such as Atom Bank’s capital raise in Q4 suggest
the market is re-opening at the top end for high quality names which may
open the door slowly to the wider market through 2024, in particular once
general elections in the UK and US have completed.

Broadly speaking, 2023 has been a truly challenging year for FinTech around
the world and closer to home in the UK. Necessity nevertheless remains the
mother of invention, and investors are unanimously excited about to “the
innovation yet to come.

SIGN UP FOR OUR INVESTMENT EVENT

ABOUT US

About Innovate Finance

Board Members

Meet the Team

Corporate Announcements

Contact

Innovate Finance: Our Net Zero Commitments

MEMBERSHIP

Our Community

Become a Member

Membership Area

Submit Member Jobs

PROGRAMMES AND EVENTS

Talent and Skills Programme

Capital and Investment Programme

Innovate Finance Events

Events by our Members

Ecosystem Events

FinTech National Network

Innovate Finance Limited

(Company Number 09007658)
is registered in England and Wales
5th floor,
2 Throgmorton Avenue,
London, EC2N 2DG, UK

Email: [email protected]

Telephone Number: 02038488692

Privacy & Cookie Policy / Contact
© 2023 Innovate Finance

Website Build by