The global fintech market attracted $164.1 billion across 6, 006 deals in 2022, falling from the high of $238.9 billion across 7, 321 deals in 2021, a report showed on Friday.
Payments space remained the strongest fintech sub-sector globally, attracting $53.1 billion in total investment, according to KPMG's 'Pulse of Fintech H2-2022' report.
The sharp drop-off in fintech investment between the first half of 2022 and the second half -- from $119.2 billion to $44.9 billion -- highlights the rapidly shifting market conditions much more clearly.
"The variance between the first half of the year and the second highlights the rapid shift in investor sentiment amidst a combination of challenges -- high inflation and rising interest rates, the lack of IPO exits, the downward pressure on valuations, and, of course, the turbulence in the crypto space, " said Anton Ruddenklau, Global Head of Financial Services Innovation and Fintech, KPMG International.
"But the news wasn't all negative. Regtech (regulatory technology), in particular, saw incredible investment in 2022, " he added.
Regionally, the Americas remained the dominant force of fintech investment globally, accounting for $68.6 billion in investment in 2022 (the US accounted for $61.6 billion of this total).
The Asia-Pacific region reached a marginal new high of $50.5 billion during 2022, while the EMEA region attracted $44.9 billion, the report said.
Investment in crypto and blockchain fell from $30 billion in 2021 to $23.1 billion in 2022.
The decline in the second half of the year was particularly sharp, as scrutiny in the space picked up significantly.
"With interest rates still rising, valuations are going to remain quite tricky for some time. This will likely keep a lot of the biggest potential M&A transactions on the shelf as investors wait to see if prices come down even further, " said Ruddenklau.