Global fintech investment falls over H1 2023 amid economic turbulence but sector remains resilient
Despite the tide of economic uncertainty and a drop in funding activity, the fintech sector continues to prove its resilience by attracting significant levels of investment.
The fintech investment landscape remains resilient
This is according to the UK industry body Innovate Finance, which has released its analysis of the global fintech investment landscape for H1 2023.
The first half of this year saw a total of $27.3 billion being injected into the industry globally through 1,714 capital investment deals.
However, when compared to the 2,500 deals that occurred during the second half of 2022, which drew in a larger $31.7 billion, the 14% decline suggests that investment activity is on a downturn. The data attributes this to recessionary trends, including inflation and global conflict.
In essence, investors are continuing to act with caution, and it is the social and economic activity of the next six months which will determine which way these figures swing.
No V-shaped recovery
When looking at its home market of the UK, Innovate Finance recognises the impact factors such as high inflation and constraints on cash flow have had on investment activity.
As described in its previous Investment Landscape report of July 2022, the importance of effective operations within a highly competitive market has been underlined in the number of business failures stemming from the worsening economic landscape.
Kevin Chong, co-founder at Outward VC, echoes the narrative of this earlier report: “With inflation remaining stubbornly high despite the highest interest rates in a generation, it is clear that there will not be a V-shaped recovery.”
Yet as with most industries, you can’t enjoy the highs without experiencing the lows. Despite the aforementioned economic uncertainly, fintech companies, and particularly those with a more established footing in the market, have continued to demonstrate their ability to thrive.
This has been primarily achieved through leveraging new technologies and capitalising on market opportunities.
Innovate Finance describes its 2023 analysis as “an indicator of the broader fintech sector’s scale, with companies striving to differentiate themselves and capture market share”.
Overall, it remains clear that the economic downturn is having little effect on the evolution of the fintech investment landscape. And despite the reinstated necessity to evolve with caution, opportunities for growth remain for both established and emerging market participants.
Reflecting of its findings, Janine Hirt, CEO of Innovate Finance, ascertains that the UK is still receiving more investment in fintech than all of the rest of Europe combined.
“The drop in global and UK fintech investment is an expected result of the current economic landscape, reflecting the cautious investor sentiment as seen across equity markets over the last 12 months,” says Hirt.
