Fintech funding falls 46%; Bank startups among the worst affected

In 2022, fintech companies secured a total of USD 75.2 billion in funding, a total that represents a 46% decrease from 2021. The number of deals also fell, falling 8% year-on-year (YoY) from 5,474 deals in 2021 to 5,048 deals last year, data from CB Insights’ State of Fintech 2022 shows.

Fintech funding fell steadily throughout the year, falling from US$30.4 billion in Q1 to US$21.2 billion in Q2, US$13 billion in Q3 and US$10.7 billion in Q4 – the latter the lowest level since 2018.

Global fintech funding quarterly, Source: State of Fintech 2022, CB Insights, January 2023

Investors slowed their investment pace in 2022 amid declining public markets, a trend evidenced by the decline in $100 million mega rounds.

In 2022, mega-rounds totaled just $36.5 billion, marking a 60% drop from 2021’s record activity. The number of mega rounds also fell by 52% to 179.

The top five equity deals of the year were Checkout.com’s USD 1 billion Series D, Flexport’s USD 935 million Series E, Klarna’s USD 800 million round, Viva Wallet’s USD 869 million round and Coda Payments’ USD 690 million Series C.

Checkout.com is a company based in the United Kingdom that provides a cloud-based end-to-end payment platform; Flexport is a US technology company focused on supply chain management and logistics, including order management, trade finance, insurance, freight forwarding and customs brokerage; Klarna is a leading buy now, pay later (BNPL) startup from Sweden; Viva Wallet is a Greek new banking startup targeting small and medium-sized enterprises (SMEs); and Coda Payments is a Singaporean provider of cross-border monetization solutions for digital products and services.

Fintech mega-round funding and deals in 2022, Source: State of Fintech 2022, CB Insights, January 2023

Looking at Q4 2022 calculations, data shows that the US continued to lead the world in fintech funding and deals, securing a total of US$3.9 billion across 342 deals. Europe came in second, with USD 2.8 billion raised through 248 deals, followed by Asia with USD 2.7 billion and 228 deals.

The figures give the US a 35% market share in Q4 global fintech funding, while Europe and Asia recorded market shares of 26% and 23% respectively, a ranking consistent with previous quarters.

Across all regions studied, Latin America and the Caribbean recorded the sharpest drop, falling 71% year-on-year from US$13.9 billion in 2021 to just US$4 billion in 2022.

Fintech funding by region in Q4 2022, Source: State of Fintech 2022, CB Insights, January 2023

While the US, Europe, Asia and Latin America all witnessed a decline in both fintech funding and number of deals, Africa was the only region to see a year-on-year increase in fintech deals, recording 227 rounds in 2022. The figure represents an increase of 25% year-on-year. .

Key deals secured in 2022 include MoneyFellows’ US$31 million Series B, Moov’s US$30 million funding round, as well as Tanda and Telda, which secured US$20 million each in respective seed rounds. The four rounds were the region’s largest fintech deals in 2022.

MoneyFellows is a collaborative lending and savings platform from Egypt; Moove is a mobility fintech offering revenue-based vehicle financing and financial services to mobility entrepreneurs across ride-hailing, logistics, mass transit and instant delivery platforms; Tanda is a Kenyan paytech startup; and Telda is an Egyptian consumer money app.

Bank startup funding takes a hit

Although all the major fintech categories saw a drop in funding last year, data shows banking startups took the biggest hit, with funding plunging 63% and deals falling 33% year-on-year. Globally, banking startups secured just USD 9.4 billion through 299 deals – the lowest level since 2018.

Notable deals that closed in the fourth quarter of 2022 include Tryllian’s US$358 million round, Lulo Bank’s US$200 million round and Avant’s US$150 million round.

Tryllian is a digital bank from the US that aims to provide customers with bank and payment accounts, investments and insurance services in one app; Lulo Bank is a Colombian mobile banking app that offers money transfers, payment services and lending products; and Avant is an American fintech company that offers digital banking products, including personal loans, credit cards and auto financing.

Global Banking Finance, Source: State of Fintech 2022, CB Insights, January 2023

At the other end of the spectrum, capital markets technology companies recorded the lowest percentage drop in funding, with total funding falling 39% year-on-year from $3.8 billion in 2021 to $2.3 billion in 2022. Meanwhile, the number of deals fell to five- lowest year of just 119 in 2022.

Top equity deals in the space secured in Q4 2022 include Vesttoo’s US$80 million Series C, Viridios Capital’s US$36 million Series B, and BMLL Technologies’ US$26 million Series B.

Insurtech, meanwhile, was the only fintech sector to see an increase in mergers and acquisitions (M&A) transactions year-on-year, recording a total of 81 deals in 2022, up 40% from 2021’s 58. The figure represents a new high for the sector .

2022 was an eventful year for the fintech industry, which was characterized by a lot of hype around trends including non-fungible tokens (NFT), open banking, embedded finance and buy now pay later (BNPL).

While many of these propositions and business models are still trying to find their feet and define a path to profitability, categories including challenger insurtech, challenger banks and the payment process (POS) are beginning to be better understood and find market. applicability and relevance, according to a report from Dealroom and ABN-AMRO Ventures.

The Fintech VC hype cycle in 2022, Source: Fintech Report 2022, Dealroom/ABN-AMRO Ventures, January 2023

Featured Image Credit: Edited from Unsplash