Fintech investments are seeing a global decline in 2024

A recent report by KPMG revealed that fintech investments have seen a global decline in 2024 so far. The first half of 2024 has seen 2,255 related deals, totaling in $51.9 billion, and while the figure is still high, it is considerably lower than H2 2023, when the number of deals reached 2,287, totaling in $62.3 billion.

VC investments on the decline

KPMG’s report shows that venture capital investments have been on a decline in all key regions. The APAC region and the US have seen relatively modest declines between H2 2023 and H1 2024. In the Americas, the figure dropped from $38.8 billion to $36.7 billion.

Meanwhile, in the Australia-Pacific region, the figure dropped from $4.6 billion to $3.7 billion. However, the EMEA region saw a much greater hit, with the drop going from $19.1 billion in H2 2023 to $11.4 billion in H1 2024.

Commenting on the new figures, KPMG International’s global head of financial services, Karim Haji, said that the high cost of capital and geopolitical uncertainty linked to conflict and elections was to blame. Haji believes that the geopolitical issues have put a major damper on global investments in the first half of this year and that the fintech market was badly hit because of it.

Investors are cautious with their investments

Explaining the situation further, Haji noted that investors felt the need to act more cautiously. This does not only concern large transactions, especially on the M&A front, but instead, the investors have changed their entire focus.

There are strong concerns about valuations, the profitability of certain potential targets, and alike, which is why investors have been more focused on improving the companies they already own, rather than seeking to buy new ones.

The data suggests that little is expected to change in the near future. Right now, the fintech investment sector is expected to remain subdued in the second half of this year, especially given the high interest rate environment.

High interest rates lead to a higher cost of capital, which once again represents an issue for investors. Another reason for their hesitance to return to new purchases revolves around the approaching presidential elections in the United States.

Even so, there is a bit of optimism regarding the future, as the deal volume is expected to continue to grow slowly over time. However, average deal sizes are expected to remain small compared to historical norms, according to Haji.