4 charts, Business of Fintech

Q3 fintech funding: Investors cut fewer deals and signed smaller checks

  • Facing a looming recession and uncertain macroeconomic conditions, fintech investors are more hesitant about signing large checks.
  • While fintech funding dropped to 2020 levels, the US continued to lead global funding share by a large margin.

Email a Friend

Q3 fintech funding: Investors cut fewer deals and signed smaller checks

After three-quarters of consecutive drops in fintech funding, we can safely say that the investment activity of 2021 was an outlier. This year, the looming recession and uncertain macroeconomic conditions are making fintech investors more hesitant to sign large checks. 

Looking at the current status of fintech funding, startups raised $12.9 billion across 1,160 deals last quarter – a drop of 64% year-over-year (YoY), according to the State of Fintech Q3 Report by CB Insights. 

The report showed while fintech funding returned to 2020 levels, the US continued to lead global funding share by a large margin. Every fintech category showed a slowdown, including banking, payments, wealth management, digital lending, capital markets, and insurtech. However, insurtech saw the smallest quarterly decline, experiencing only a 4% drop. 

Here are the main takeaways, in four charts:

1. Global fintech funding drops to Q4 2020 levels

  • The global fintech venture landscape showed a slowdown for the third consecutive quarter. Fintech raised only $12.9 billion across roughly 1100 deals. 
  • This also marked the weakest quarter since Q4 2020, with a 64% drop in year-over-year investments and a 38% drop quarter over quarter.
  • The deals dipped slightly from 1,280 in Q2 to 1,160 in Q3. This reflects how investors are still eager to make deals despite cutting smaller checks.

The war in Ukraine, high inflation, and rising interest rates are concerns for investors. However, looking at the big picture, we can see that while funding and deals showed a sharp drop in 2021, it's just recovering back to normal levels. Year-to-date, funding is around $320 billion, which exceeds the total funding we have seen in the three years prior to 2021.

2. The US leads in Q3 funding, followed by Europe and Asia 

  • The US attracted the most fintech funding, securing $5.1 billion, roughly 40% of the global investment. Europe followed with $3.5 billion in fintech funding, and Asia with $3.3 billion. 
  • However, the US raised 43% less funding than the previous quarter, making it the lowest point since the fourth quarter of 2020.
  • Despite the drop in investments, the top fintech deal went to Pie Insurance, a US-based Insurtech company, which received $315M for Series D evaluation.

The report showed that the US continues to lead the global funding share by a large margin. The number of deals, only slightly down, shows keen interest, and perhaps the biggest impediment to investor confidence is the uncertainty in macroeconomic conditions.  

3. Payments funding and deals dominate, though dropping to 2020 levels

  • Payments funding and deals dropped to their lowest levels since Q4 of 2020. The sector managed to raise $3.9 billion over 178 deals. 
  • Banking funding reached its lowest level since Q4 of 2018. The sector raised only $1.2 billion, an 86% decline from all-time highs. However, the deal count increased from 74 in Q2 to 76 in Q3. 
  • Insurtech funding remained relatively flat throughout 2022. It saw the smallest QoQ decline of any fintech sector, ticking down 4% from $2.4B to $2.3B. The deal count also fell slightly from 143 in Q2 to 140 in Q3. 

Overall, all sectors saw a drop in funding to 2020 levels or below. Banking funding saw the largest drop, down to 2018 levels. However, fintech companies still receive significant funding from investors, and funding remains larger than pre-pandemic levels.

4. Coinbase Ventures leads investments rounds 

  • Coinbase Ventures was the most active fintech investor in Q3, backing 16 fintechs and surpassing Tiger Global Management, which topped the list during the previous two quarters.
  • Other Q3 highlights include a drop in mega-round funding at $4.4B, the lowest level since 2018.
  • And finally becoming an endangered species, fintech unicorn births fell below double digits for the first time since 2020. There were six new unicorns in Q3.

Coinbase Ventures was the most active fintech investor and 1 of only 2 Corporate Venture Capitalists (CVCs) to make the top investors list (alongside Kraken Ventures). The report showed that while institutional investors shied away, crypto CVCs doubled down on bets.

0 comments on “Q3 fintech funding: Investors cut fewer deals and signed smaller checks”

Business of Fintech

2024 Industry Outlook: What matters most to CEOs and CFOs

  • Ensuring bottom line growth is healthy and not “junk food” going into 2024 is a key priority of financial leaders.
  • Despite increased profitability high up on their agendas, many leaders are hardly optimistic about the economy changing for the better in the coming year.
Sara Khairi | November 03, 2023
Banking, Business of Fintech, Future of Investing

Closing the equity gap for underrepresented entrepreneurs: How Bank of America is driving diversity and inclusion in venture capital

  • Many small and new businesses are phasing out every year in the US. Although it can be argued that there are many reasons that may contribute to the failure of these businesses but inaccessibility to funding appears to be one of the root causes.
  • Bank of America is en route to creating a new narrative. To address these stumbling blocks and shine a light on diverse fintech founders, the Wall Street bank is devising an accelerator program called ‘Bank of America Breakthrough Lab’.
Sara Khairi | June 02, 2023
Business of Fintech

Businesses are investing for growth despite continuing economic headwinds

  • Nearly half of the businesses are trying to bring in new revenue by focusing on growing customers and investing in new product features.
  • Two-thirds of financial services businesses say the risk of economic slowdown has made them focus on improving their margins, shows a new Stripe report. 
Sara Khairi | April 06, 2023
Business of Fintech

Fintech Meetup kicks off this week, showcasing an industry in flux

  • Fintech Meetup was founded by some of the same people that developed Money 20/20.
  • Launched online during the pandemic, this year's show is live and in Las Vegas this week.
Aaron Singer | March 21, 2023
Business of Fintech

‘Dave performs well in every macroeconomic environment’: Dave’s Jason Wilk on shifting up a gear in 2023

  • By redirecting its strategies Dave navigated its way through the challenging fourth quarter and pulled through the bear market in comparison to Q3 2022.
  • Jason Wilk, CEO of Dave talks about what were the strategy drivers to ride out the market downturn in 2022, and what's next up for the neobank in 2023.
Sara Khairi | March 16, 2023
More Articles