- Fintech in crisis: Investment fell to its lowest level in 7 years, due to macroeconomic uncertainty, geopolitical conflicts, and a lack of successful exits for investors.
- The fourth quarter of 2024 showed signs of recovery, with a global investment increase to $25.9 billion, suggesting a possible rebound in 2025
According to the Pulse of Fintech H2’24 Global Analysis of Fintech Funding report by KPMG, recently released, fintech funding only reached $95.6 billion globally, a level not seen since 2017.
Factors such as macroeconomic uncertainty, geopolitical conflicts, and investor caution in a market with unfavorable exits have contributed to this decline.
A 2024 marked by caution and crisis
Throughout the year, investment in fintechs steadily declined. In the first half of the year, $51.7 billion in investments were recorded, while in the second half, the number fell to $43.9 billion.
This negative trend impacted all regions, with the Americas leading the fundraising with $63.8 billion, followed by Europe, the Middle East, and Africa (EMEA) with $20.3 billion, and Asia-Pacific with $11.4 billion.
One key factor in this crisis has been the lack of successful exits for investors. In 2024, the total value of fintech exits was $37.3 billion, a slight increase compared to $28.5 billion in 2023, but still far from the levels reached in the record years of 2020 and 2021. This has led to greater caution among investors, who have preferred to adopt a conservative approach and wait for better market conditions.
Cryptocurrencies resist the crisis
Despite the widespread decline in fintech investment, the digital assets sector has shown relative resilience. In 2024, investment in cryptocurrencies and digital assets grew from $8.7 billion in 2023 to $9.1 billion.
Four of the five largest transactions of the year in this segment occurred in the second half of the year, including Stripe’s acquisition of Bridge for $1.1 billion and notable funding rounds for Praxis ($525 million), Blockstream ($210 million), and Current ($200 million).
Additionally, the digital assets sector continues to evolve with initiatives like mBridge, a project aimed at improving cross-border transactions with multiple digital currencies issued by central banks (CBDCs). Interest in stablecoins has also grown, with the launch of Ripple’s new stablecoin RLUSD in the second half of 2024.
Traditional banks fall behind
While fintech companies have faced difficulties attracting investment and can be said to have experienced a crisis, traditional banks have encountered even greater problems in adapting to the digital environment. Investment by financial institutions in fintechs was particularly low in 2024, as many banks still struggle to capitalize on the business models of these emerging companies.
In contrast, companies from other sectors, such as e-commerce and technology, have continued investing in fintech solutions to enhance their services and expand their share of the value chain. This trend reinforces the idea that innovation in financial services will not necessarily come from traditional banks but from companies looking to integrate fintech tools into their business models.
A positive turn for 2025?
Despite a challenging 2024, the end of the year has left some encouraging signs. In the fourth quarter, global fintech investment grew from $18 billion in the third quarter to $25.9 billion.
In the Americas, investment rose from $10.8 billion in the third quarter to $20.2 billion in the fourth, while in EMEA, growth was from $3.3 billion to $4 billion. These figures suggest that pessimism may be dissipating, and the market could enter a recovery phase in 2025.
Trends for the upcoming year point to renewed interest in digital payments, digital assets, and AI-powered regulatory technology. While challenges remain, the fourth-quarter rebound suggests that investors may be regaining confidence in the fintech sector.
2024 will be remembered as a crisis year for fintechs, but recent signals indicate that the worst may be over. Now, the big question is whether this positive trend will solidify in 2025, or if the sector will continue facing obstacles on its road to recovery.