FinTech Funding Falls in Q2 2023 for Lowest Quarter Since 2017
After reaching soaring highs in recent years, the FinTech funding market has continued to decline — with the latest figures amounting to a multi-year low.
About the report:
According to CB Insights’ State of FinTech report, global FinTech funding totaled $7.8 billion in the second quarter of this year. Not only was this off nearly 50% from the prior quarter (note: Q1 was buoyed by Stripe’s $6.5 billion Series I round) but also marks the figure’s lowest point since 2017. Similarly, “megarounds” — meaning those consisting of $100 million or more — totaled $2 billion during the quarter, representing a six-year low.
Meanwhile, the number of deals getting done fell for the fifth straight quarter with Q2 ending up at 845 deals. The 22% quarter-to-quarter decline also outpaced other venture industries, which saw a 16% drop in deals on average.
Looking closer at the report, no single segment of the FinTech industry was hit harder than payments. In fact, funding for payment startups saw a quarter-to-quarter drop off of 75%. Again, Stripe’s massive round in Q1 does skew these results, but even discounting that payments took a major hit. Following payments, digital lending saw the next largest decline, dropping 44% to $1 billion during the quarter. Additionally, CB notes that every individual FinTech category experienced reduced funding on a quarter-to-quarter basis.
Zooming out, Q2 2023’s year-over-year decline was even more severe as the $7.8 billion total is but 36% of Q2 2022’s $21.9 billion. Of course, it’s an even farther cry from the $37.9 billion second quarter record set in 2021.
On a brighter note, with the drop in megadeal funding, early stage startups are getting more shine. During Q2, 72% of FinTech deals came from these players. Should the rest of the year see a similar split, CB states that it would be a five-year high.
Obviously 2023 has not been a great year for FinTech so far. Beyond the drop in funding that’s on full display in this latest report, valuations for some high-profile firms have also tumbled. To be fair, startups in the sector may not be wholly to blame for this shift as the larger tech industry has definitely seen its share of struggles in recent years.
If there’s a silver lining to these Q2 figures, its that early-stage startups are continuing to see investment. At the end of the day, while megadeals from well-established companies can help bolster a quarter on paper (see: Q1 2023 and Stripe), the health of these smaller firms is how the success and future of FinTech will ultimately be measured.