Investment in Irish financial technology (fintech) companies plummeted in 2023, new research from KPMG has indicated, as deal volumes and values plunged worldwide.
A melange of interconnected challenges – including rising interest rates, geopolitical uncertainty and still-elevated levels of inflation – conspired to shrink the market for investment in technology last year as investors opted to hold on to their money.
Fintech investors were no different, the report indicates.
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In the Republic in 2023, just 11 transactions and investment deals were completed with a total value of $60.83 million (€56.2 million), representing a 94 per cent collapse from $1 billion across 22 deals in 2022, KPMG’s latest Pulse of Fintech release reveals.
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The second half of the year was particularly lacklustre, KPMG said, with just $1.61 million in merger and acquisition, venture capital and private equity transactions, down from $742 million in the same period in 2022.
The fourth quarter marked “a unique and salutary milestone” in which no transactions were recorded, the report’s authors said, for the first time since 2012.
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The largest deal in the Republic last year was the $53 million invested in the Irish-registered unified payments company NomuPay.
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However, the Republic was not an outlier, according to the report. KPMG said global investment dropped from $196.6 billion across 7,515 deals in 2022 to a six-year low of $113.7 billion across 4,547 deals in 2023.
Against the backdrop of the war in Ukraine, investment in the Europe, Middle East and Africa region was particularly mute with the $24.5 billion spent in the year representing a seven-year low.
“Given the level of uncertainty in the market in 2023, it was no surprise to see fintech investment fall substantially from the levels seen over the last two years,” said Anna Scally, head of technology and media at KPMG Ireland.
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The market is expected to begin 2024 in “subdued” fashion, she said. However, any downward movement in interest rates could spark a revival in deals activity.
“The exit environment will also be critical to watch as the extended lack of exits has made investors hesitant to deploy funds,” she said. “Investors remain cautious and will be looking to invest in companies that can demonstrate a clear path to sustainable revenue and profitability.”
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