Despite a challenging year for global fintech investment in 2024, the sector showed signs of recovery in the last quarter, offering optimism for 2025 particularly in areas including regtech, artificial intelligence (AI), and payments, new data released by KPMG show.

Total fintech investment fell to a seven-year low at US$95.6 billion across 4,639 transactions in 2024, a decline which was driven mainly by persistent macroeconomic challenges, geopolitical conflicts and tensions, and a number of high-profile elections in major jurisdictions around the world.

These challenges kept the level of uncertainty very high, leading to a pullback in mergers and acquisitions (M&A). These transactions fell from US$60.2 billion in 2023 to US$49.6 billion in 2024 as large M&A deal value remained in short supply.

Private equity (PE) investment also declined significantly, falling from US$10.5 billion in 2023 to just US$2.55 billion in 2024. Venture capital (VC) investment, meanwhile, declined more modestly, dropping from US$49.1 billion to US$43.4 billion.

Corporate VC-participating (CVC) investment globally also fell, declining from US$26.9 billion in 2023 to US$19.6 billion in 2024, with both the Americas and nations part of the Asian and Pacific Council (ASPAC) seeing considerable contractions.

Positive momentum in Q4 2024

Despite the annual decline, fintech investment showed signs of recovery in Q4 2024. Total fintech investment rose from US$18 billion in Q3 2024 to US$25.9 billion in Q4 2024, a trend which was most prominent in the Americas and EMEA regions.

Similarly, while M&A deal value dropped annually, deal value nearly doubled from US$7.4 billion to US$14.2 billion between Q3 2024 and Q4 2024. This quarterly increase was driven by lower interest rates, improved capital costs, and reduced election-related uncertainty, providing a sense of positivity heading into 2025.

Throughout 2024, several key fintech trends emerged. In particular, the payment sector saw increased investment levels, which rebounded to US$31 billion in 2024 after falling to US$17.2 billion in 2023.

The largest transactions of the year came in H1 2024 with the US$12.5 billion Worldpay deal, but the second half of the year also saw solid deals in all regions, including the US$6.3 billion buyout of Canada-based Nuvei, the US$1.6 billion buyout of US-based Transact Campus, a US$788 million raise by Philippines-based Mynt, the US$385 million acquisition of UAE-based NeoPay, a US$309 million raise by Argentina-based Uala, and a US$267 million raise by UK-based Zepz.

The digital assets sector was another prominent fintech vertical in 2024, with global investment in the sector increasing from US$8.7 billion in 2023 to US$9.1 billion in 2024. Notable crypto deals in 2024 included the US$1.1 billion acquisition of Bridge by Stripe, as well as VC raises by Praxis, Blockstream, and Current, which secured US$525 million, US$210 million, and US$200 million, respectively.

Beyond investments, 2024 marked significant developments in the digital assets sector. The mBridge project, a collaboration between organizations and central banks primarily in the ASPAC region and Middle East, reached minimal viable product stage. The initiative aims to develop a single platform for cross border transactions of multiple central bank digital currencies (CBDC). Stablecoins also gained increased traction in 2024, with US-based Ripple launching its RLUSD during the second half of the year.

Trends to watch in 2025

The report identifies several trends to watch in 2025, offering insights into areas where fintech investment and innovation are expected to thrive this year.

One such trend is the continued growth of business-to-business (B2B) focused fintech companies, which are anticipated to attract significant interest and investment, especially in areas like payments and regtech.

Payments will remain a major driver of fintech investment globally. Investors will remain drawn to payments due to its broad applicability and substantial growth potential, especially as the sector continues to expand into areas including B2B payments.

In addition, the report forecasts an increasing focus on AI-focused regtech. The sector will continue to gain attention from investors, particularly in the EMEA region given the increasing complexities associated with ensuring regulatory compliance.

Another key trend is the rising demand for AI-driven technologies across the industry. Fintech investors, particularly corporates, will show increasing interest in startups focused on AI-enablement to improve the efficiency and effectiveness of activities like cybersecurity, as well as enhance customer experience.

Finally, 2025 is expected to bring renewed interest in digital assets and currencies, particularly in areas like market infrastructure, stablecoins, and digital tokenization. This will be driven in part by the changeover in US administration, with expectations of deregulation and a government more supportive of crypto, potentially boosting investment in crypto.

Featured image credit: edited from freepik