1PitchBook Data, Inc.John Gabbert Founder, CEONizar Tarhuni Vice President, Institutional Research and EditorialPaul Condra Head of Emerging Technology ResearchInstitutional Research GroupAnalysisPublishingDesigned by Joey SchafferContentsDataMatthew Nacionales Senior Data Analystpbinstitutionalresearch@pitchbook.comPublished on January 25, 2024Key takeaways 1Executive summary 2Key events timeline 3VC activity 4Exit activity 6Valuations 9Subsegment snapshots 11Regulatory developments 27EMERGING TECH RESEARCHFintech: State of the IndustryAn overview of fintech trends, funding flows, opportunities, and regulations PitchBook is a Morningstar company providing the most comprehensive, most accurate, and hard-to-find data for professionals doing business in the private markets.Rudy Yang Senior Analyst, Emerging Technology rudy.yang@pitchbook.com• After a boom cycle in the years following the COVID-19 pandemic, the fintech sector is now experiencing a period of normalization. $34.6 billion of fintech venture capital was recorded in 2023, representing a -43.8% YoY decline. The positioning of capital has also taken a bias toward B2B, which accounted for 72.1% of total fintech VC in 2023 compared to 40.6% in 2019.• Sectors that received the most VC (inclusive of debt funding) in 2023 include payments, alternative lending, capital markets, credit & banking, and the CFO stack. Several key trends are occurring in these subsegments, with opportunities in generative AI, real-time payments, and open banking leading the way. • In 2023, $5.9 billion in VC exit value was recorded across 185 exits, representing YoY declines of -76.1% and -22.3%, respectively. M&A activity also declined in 2023, dropping -33.6% YoY to $47.1 billion. However, some M&A activity occurred at the end of 2023, possibly signaling that 2024 will see an uptick in acquisition activity. Some fintech companies have recently also signaled preparations for potential public exits, which may help unfreeze the IPO market. • In 2023, valuation multiples for public fintech companies generally rallied from January to December. As a result, stock returns were mostly positive, with some high-growth fintech companies, neobanks, brokers, and crypto companies outperforming the market. • Regulations continue to play a critical role in the pace of innovation and influencing how businesses manage risk. Key developments in the fintech sector pertain to generative AI regulations, open banking rules, third-party relationship management, and nonbank compliance. Such initiatives are driving industry players to upgrade their infrastructures and enhance their risk-management capabilities. 2PitchBook Analyst Note: Fintech: State of the IndustryExecutive summaryAfter entering a boom cycle in the years following the COVID-19 pandemic, the fintech sector is now experiencing a period of normalization. VC deployment is retracing to pre-pandemic levels...
