Global Fintech Industry Report

The global fintech (or financial technology) market was valued at $194 billion in 2022. From 2023, it expects to grow at a compound annual growth rate (CAGR) of 16.8% to reach $492.81 billion by 2028.

Fintech Investment

The global fintech investment market is growing steadily and is expected to continue with key players' rising adoption of strategies. In 2022, global investment in the market was $164 billion across 6,006 deals. While this was down from the record-high $238.9 billion across 7,321 deals in 2021, it was still a significant investment because 2022 was such a record-breaking year. Investment remains very strong in the market. Last year was the third-best year historically for fintech investment. It was also the second-strongest year for deal volume.

Payments were the most vital area of global fintech investment 2022 at $53.1 billion. Regulatory technology, known as regtech, was the only fintech sector to trend upward last year, with investment in the space rising from $11.8 billion in 2021 to a record $18.6 billion in 2022. Investment in cryptocurrency and blockchain decreased from $30 billion in 2021 to $23.1 billion in 2022. This was still significant investment activity, comparatively.

Global M&A deal value fell from $105.1 billion in 2021 to $73.9 billion in 2022. Global venture capital investment declined from $122.9 billion to $80.5 billion. Private equity growth investment also fell, but less, going from $11 billion in 2021 to $9.7 billion in 2022. Again, this is still significant activity following a record-breaking year in 2021, which points to positive trends for 2023 and the future. Increasing adoption is expected to drive the growth of the global fintech investment market.

Market Segmentation

Fintech enhances or automates financial services and processes using specialized software and algorithms to help businesses and consumers manage their finances via devices like computers or smartphones. It is typically used to automate banking services, insurance, investments, trading, risk management, and other financial insights. The market includes:

Internet and mobile payments
Network credit
Intelligent financial management services
Blockchain
P2P lending
Online acquiring
Mobile wallets
Personal finance management
Private Financial Planning
MSME (micro, small, & medium enterprises) services
MPOS (mobile point-of-sale)
Bitcoin
Crowdfunding

Key Trends and Market Drivers

Government Support

Government initiatives worldwide are aiding the digital economy and fintech industry, increasing efficiency via real-time payments, open application programming interfaces, and blockchains. Also, governments are investing more in boosting the digital economy, leading to market growth.

Rising Adoption

The rising adoption of digital payments and open banking also fosters growth in the fintech sector. Increasing Internet penetration, ownership of smartphones, and growing adoption of cashless currency bolstered payment and money transfer methods. The industry saw significant growth due to the COVID-19 pandemic as more consumers and businesses embraced touchless payments and other digital services. This type of growth is only expected to continue on an upward trajectory in a more digitalized world.

Additionally, fintech companies are investing more in the latest technologies and ways to improve user-friendliness and protect against fraud and cybercrime, increasing demand among the younger generations and furthering industry growth. There are also more and more start-ups and established companies providing various opportunities for economic development for small and medium-sized enterprises through various funding options such as marketplace lending and merchant and e-commerce finance.

Artificial Intelligence (AI)

Personalized AI is also expected to continue to impel fintech market growth. Machine learning is increasingly used to improve credit decision models, track borrower spending behaviors, and spot risk patterns. Robotic process automation is also used to enhance consumer experiences, reduce repetition, and lower expenses. The rise of AI is also making it easier for companies to tailor their offerings to individual needs and preferences. These innovations are expected to help grow the market in the coming years as they reduce human error, increase transparency, and cut costs.

Blockchain and Decentralized Finance

Blockchain technology is a decentralized database that uses cryptography to maintain a continuously growing list of linked and secured records. It lets data be stored securely without needing third-party banking systems. Because it has no single point of failure, it is difficult for bad actors to access. Any information stored on the blockchain cannot be changed once in the system. Because of its unique benefits, blockchain is used across many industries to streamline and secure transactions.

Its impact on the fintech industry is expected to be rather significant in future years, as many countries are predicted to use blockchain to facilitate cross-border transactions between countries around the world.

Embedded Finance

As digital finance tools become more commonly used, embedded finance (powered by AI) will remain a significant player in fintech. Solutions such as Apple Pay, Google Pay, and Samsung Pay allow customers to pay with their phones at retailers, restaurants, online, and other establishments. Embedded finance is also expected to become an even hotter topic regarding wealth management and investment advice as AI continues to proliferate and show its benefits in various areas.

M&A

Deals in the fintech sector tightened in 2022 as valuations and investment activity were affected by the performance of tech stocks and higher interest rates. The funding dropped by nearly half last year to around $75 billion. However, deal flow has proven healthy over a long-term investment outlook. Fintech investment in 2022 was more than 50% higher than in 2020. From 2013 to 2022, fintech's share of overall technology funding increased from 4% to 22%.

M&A will remain a key driver in the fintech industry, as it is still relatively early in the sector's growth trajectory. There is plenty of opportunity to realize value in an evolving industry where fintech products and services have become omnipresent across the financial landscape.

Retail fintech is moving beyond banking apps, digital wallets, and money transfers and pioneering new areas such as cryptocurrency, remittances, wealth management, and peer-to-peer lending. There has also been rapid development in B2B fintech infrastructure to support regulatory, compliance, and other back-office duties for banks of all types.

Traditional banks have been investing in many different fintech verticals, and banks are anticipated to continue to buy up fast-growing targets throughout 2023. There is also expected to be heavy investment from private equity and venture capital as a massive appetite remains in the market for lucrative fintech deals. Additionally, well-funded fintech firms are presumed to ratchet up M&A activity as they eye opportunities to consolidate needs and acquire their weaker competitors' tech, customers, and talent.

Another area to watch for M&A is the continued emergence of neobanks. These independent digital banks have no physical locations and only serve customers online. The neobank market is forecast to surge at a compound annual growth rate (CAGR) of 53.4% between 2022 and 2030. More than 400 neobanks opened over the past decade, so the industry is primed for dealmaking. Traditional banks are attracted to the technologies and capabilities that neobanks provide, as they target younger customers by offering the newest technologies. PE and venture capital are also drawn to the growing neobank market. Neobank consolidation through M&A is expected to be a hot trend soon.

Americas: Sam Smoot at +1 (813) 898 2350 / Smoot@BenchmarkIntl.com

Europe: Michael Lawrie at +44 (0) 161 359 4400 / Lawrie@BenchmarkIntl.com

Africa: Anthony McCardle at +27 21 300 2055 / McCardle@BenchmarkIntl.com

ABOUT BENCHMARK INTERNATIONAL:

Benchmark International is a global M&A firm that provides business owners with creative, value-maximizing solutions for growing and exiting their businesses. Benchmark International has handled over $10 billion in transaction value across various industries from offices across the world. With decades of M&A experience, Benchmark International’s transaction teams have assisted business owners with achieving their objectives and ensuring the continued growth of their businesses. The firm has also been named the Investment Banking Firm of the Year by The M&A Advisor and the Global M&A Network as well as the #1 Sell-side Exclusive M&A Advisor in the World by Pitchbook’s Global League Tables.

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