In 2024, global fintech investment saw a significant downturn, with total funding plummeting to $95.6 billion across 4,639 deals, reaching its lowest point since 2017. This decline can be attributed to ongoing macroeconomic challenges and heightened geopolitical tensions, as highlighted in a recent report.
Throughout the year, the investment environment steadily declined, with total funding dipping from $51.7 billion in the first half to $43.9 billion in the latter half. However, there was a noticeable recovery in the fourth quarter, where investment climbed to $25.9 billion from $18 billion in the third quarter, indicating possible signs of market stabilization.
It’s been described as a tough year for many players in the fintech ecosystem. Large-scale deals, which have traditionally driven growth in fintech investments, experienced a lull, with few significant transactions occurring.
Previous assessments indicated that investments had already decreased to $113.7 billion in 2023, considered the worst performance in five years, but 2024 has outdone even that disappointing figure.
Regionally, the Americas maintained its position as the leading market for fintech, securing $63.8 billion within 2,267 deals, of which the United States accounted for $50.7 billion. The EMEA region brought in $20.3 billion through 1,465 deals, while APAC gathered $11.4 billion across 896 transactions.
Within Europe, the UK continued to show exceptional strength, attracting more fintech funding than any other European country combined. Projections for future investments in the UK remain cautiously optimistic, suggesting that despite current positive trends, there may be changes in the forthcoming year.
The payments sector emerged as the most resilient, drawing $31 billion in investment, followed by areas such as digital assets and currencies at $9.1 billion, and regulatory technology (regtech) at $7.4 billion. This distribution appears to reflect sustained investor confidence in established payment technologies, coupled with increasing interest in newer sectors.
Looking forward to 2025, certain trends are anticipated to influence the fintech investment sector:
1. **Integration of Artificial Intelligence**: There is a rising interest in AI-enabled solutions, particularly within regtech and cybersecurity areas.
2. **Digital Assets Development**: There is potential for growth in market infrastructure, along with advancements in digital tokenization and stablecoins.
3. **Payment Innovations**: The payments sector is expected to continue its strong performance, chiefly driven by business-to-business (B2B) solutions and enhanced cross-border payment technologies.
While artificial intelligence represents a promising area for investment, caution remains prevalent among investors. A particular emphasis on AI-focused regtechs is expected in the near term, aligning with financial institutions’ pursuit for more effective responses to the increasingly intricate regulatory landscape.
Despite the overarching decline in investment, certain positive indicators point toward a potential recovery in 2025. The uptick in activity during the fourth quarter, along with favorable changes in interest rates across different regions and the resolution of critical political uncertainties, may signify an improving investment climate.
Additionally, mergers and acquisitions (M&A) displayed resilience in the final quarter, with deal values nearly doubling from $7.4 billion to $14.2 billion, while venture capital investment rose from $9.7 billion to $11.2 billion during the same period.
Furthermore, a separate report revealed that although the fintech sector experienced a 70% financing shortfall, companies managed to boost their revenue by 14% from 2021 to 2023. Excluding cryptocurrency projects from the analysis results in an even more impressive compound annual growth rate of 21%.
As 2025 approaches, optimism is growing among investors, who are closely observing economic policies from U.S. administrations and the influence of interest rates on investment behaviors. The continuation of AI applications’ evolution within financial services and ongoing advancements in digital asset infrastructure are projected to be key contributors to growth in the coming year.