The state of global fintech in Q2
26 July, 2023Written by: Lorenzo Chiavarini

The insights shown are a selection from the fintech digital research page we just launched.
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State of the market
Fintech startups attracted $7.4B in VC funding in Q1 2023, the lowest level of VC investment since 2018. The total is less than half the previous quarter (which was somewhat skewed by Stripe’s $6.5B megaround).
Fintech funding is for now on track to match 2020 levels, but may retreat further in the coming months.
Q2 2023 is showing a slowdown at every stage of investment. While early-stage fintech investment has been relatively more resilient, it is still at half its peak level. Breakout stage shows a nearly two thirds decline from the peak last year. Late-stage has pulled back the most, with Q2 2023 being the least active quarter for more than five years.
Looking at Q2 2023, Fintech has dropped to 4th most funded industry, behind health, enterprise software and energy. Q2 for fintech has seen a 70% drop in funding from last year, compared to the 46% fall for the overall VC market.
Segments
B2B SaaS startups have attracted most of the funding in 2023 so far (53%), the highest ever. Payments startups have also attracted most of the funding (even if a large part of this came from Stripe mega round). Also notable is a considerable slowdown for crypto VC investment.
Within fintech, wealth management, and pension & savings startups have attracted the largest share, while neo brokers that are suffering the prolonged market downturn.
Have challenger banks won the market?
When looking at checking accounts, it looks so. Challenger banks dominate new account openings and are the only players increasing market share in the US. Digital banks and fintechs captured nearly half (47%) of all new checking accounts opened so far in 2023. This growth has come at the expense of large banks.
Since 2020, digital banks’ and fintech’s share of new accounts grew from 36% to 47%. Over the same period, the megabanks’ share dropped from 24% to 17%, while regional banks’ share declined from 27% to 21%.
Similar considerations hold true for Europe in general and specific markets like France, where Revolut is now the most downloaded banking app.
Explore over 330 challenger banks in Dealroom.
However, megabanks attract more affluent consumers. More than half (52%) of consumers opening an account with a megabank in 2023 earn more than $75k. Among new digital bank/fintech customers, just 21% earn that much.
This brings us to the intersection between digital banking and wealth management.
When looking at high-net-worth individuals (HNWI) and private banking customers where incumbents still dominate. For a traditional bank, a mass-market customer is worth $400–500 per year in revenues, while a high net worth individual (HNWI) or a private banking customer can be worth further multiples of this, on average 18k. In 2022, globally, these 22.5m HNWIs generated $400bn of revenue, most of which went to incumbents.
These could change for a combination of trends:
1) HNWIs are changing. More and more of them are tech entrepreneurs that are more interested in strong digital offerings than high-touch private banking models. Also, the "Great wealth transfer" is underway, by 2045, $72tn of wealth will be passed from Baby Boomers and the older members of Gen X to Millennials, which are digital natives.
2) increased demand for alternative investments, private markets (venture capital and private equity), climate-first products (real impact, not mere ESG screening), real estate, collectibles and luxury, and cryptocurrency. We track over 180 startups active in uncloking alternative assets for wealth management. Approaches varies from the direct offerings of these products (e.g. Moonfare platform to access private markets, Carbon equity in private market x climate intersection, but also infrastructure and empowering wealth and asset managers such as bunch.capital “OS for private market investors” and CAIS a financial technology platform helping independent wealth channels with access to alternative investments).
Also relevant here are tokenized assets, especially around security and debt trading.
3) generative AI for wealth management: robo-advisor has been around for a long time with some huge successes like Betterment crossing $2tn of assets and some other bumps on the road. Generative AI holds the promise to replicate the high-touch advice of private banking with a more scalable tech-enabled model so to make it accessible to wider audiences. However, all is yet to be seen, will generative AI be mostly a final wrapper layer after traditional robo advisors to give a bit more explanation and "human" touch? Or will it take the whole customer journey? Will it also bring a new efficiency level in financial research for wealth advisory?
Wealth management incumbents seem to be quite bullish, Bloomberg developed BloombergGPT generative AI model, which will be integrated into the firm’s terminal software, while Morgan Stanley is using OpenAI-powered chatbots to assist financial advisors as a knowledge resource, and Citadel is in the process of getting an enterprise-wide ChatGPT license (even if the claim generative AI is too hyped and they seem to be looking more at software development than financial research).
For more, read the full deep dive on wealth management software by Remus Brett, partner at LocalGlobe.
We will see in the coming months how wealth tech startups will integrate generative AI in their offerings.
Over $22B have been poured into Generative AI companies globally in the last five years, with $15.2 this year alone (even not considering Open AI $10B financing, 2023 has already been the most active year by far). Discover more in our Generative AI guide.
Exits roundup
Public listings (IPOs and SPACs) are at their minimum in the latest years, while M&A is very active and above 2020 levels.
M&A deep dive
In our Q1 update, we discussed in-depth the four types of M&A we saw on the market, expecting further consolidation across those routes:
- bankruptcies & fire sales
- Incumbent acquisition of fintech startups
- startups expanding into new markets or consolidating their lead by acquiring peers
- PE buyouts taking advantage of the challenging public market
A segment seeing increased consolidation is the finance infrastructure one across core banking, Banking-as-a-Service (BaaS) and embedded finance, where M&A was by far the most active ever in the first half of 2023.
In Q1, we saw the once high-flying UK embedded finance and BaaS provider Railsr has been bought by a consortium of its existing investors, and it’s going into administration to restructure. Showing that despite the potential for BaaS and embedded finance market, profitability can be challenging and create pressure in this market environment.
Among the different acquisitions stands out Visa's acquisition of Pismo, a Brazilian cloud-native issuer processing and core banking platform with operations in Latin America, Asia Pacific and Europe, for $1B in cash.
Also, FIS, the fintech giant that runs a wide range of payment, banking and investment services, has acquired Bond, an embedded finance provider which last raised funding in 2020.
Crossing to the embedded insurance space, we also saw Clyde being acquired by Cover Genius.
Other M&A operations which captured our attention included:
Nasdaq buying Thoma Bravo-owned software firm Adenza for $10.5B, the largest acquisition ever by the stock exchange operator. Adenza's risk management and regulatory software is primarily used by banks and brokerages and will help Nasdaq diversify further beyond its roots as an exchange operator. However, the acquisition has raised some eyebrows due to the high price valuing Adenza at almost 18-times its expected 2023 revenue.
Lastly, last month Robinhood also announced its acquisition of credit card startup X1 for $95M. The exact rationale behind the acquisition is not known, but quite likely, a combination of the following factors: diversification of Robinhood offering “broadening [its] product offerings” and “deepening” its relationship with existing customers". It is to be noted that Robinhood revenues grew only 10% in 2022; X1 offers a no-fee reward credit card and recently added the ability to buy stocks by using earned reward points for its cardholders.
Explore more insights on the fintech market on our new fintech digital research page.
Partners
ABN Amro Ventures
Leading fintech corporate venture fund.
ABN AMRO Ventures is the corporate venture fund of ABN AMRO Bank, a leading bank in the Netherlands. The €150m balance sheet fund invests in the most relevant up-and-coming technology companies to boost and accelerate innovation for the bank and its clients.
The collaboration between the fund and the portfolio companies goes far beyond capital: ABN AMRO Ventures actively provides knowledge and expertise, access to the bank and its systems, support from relevant specialists inside and outside ABN AMRO, as well as an extensive external network.
Specialised banking for tech and life science sectors
HSBC Innovation Banking is HSBC's new global, specialised banking proposition for businesses in cutting-edge sectors, such as tech and life sciences, and their investors.
It combines the expertise of the former Silicon Valley Bank UK (SVB UK) with HSBC's international strength in the US, Israel and Hong Kong to enable businesses focused on innovation to compete globally.
HSBC Innovation Banking supports a range of businesses from early-stage growth ones to late-stage public and private corporates, and connects them with its global capabilities, including investment banking, private banking and asset management services.
Related info
Sectors: Fintech
Segments
B2B SaaS startups have attracted most of the funding in 2023 so far (53%), the highest ever. Payments startups have also attracted most of the funding (even if a large part of this came from Stripe mega round). Also notable is a considerable slowdown for crypto VC investment.
Within fintech, wealth management, and pension & savings startups have attracted the largest share, while neo brokers that are suffering the prolonged market downturn.
Have challenger banks won the market?
When looking at checking accounts, it looks so. Challenger banks dominate new account openings and are the only players increasing market share in the US. Digital banks and fintechs captured nearly half (47%) of all new checking accounts opened so far in 2023. This growth has come at the expense of large banks.
Since 2020, digital banks’ and fintech’s share of new accounts grew from 36% to 47%. Over the same period, the megabanks’ share dropped from 24% to 17%, while regional banks’ share declined from 27% to 21%.
Similar considerations hold true for Europe in general and specific markets like France, where Revolut is now the most downloaded banking app.
Explore over 330 challenger banks in Dealroom.
However, megabanks attract more affluent consumers. More than half (52%) of consumers opening an account with a megabank in 2023 earn more than $75k. Among new digital bank/fintech customers, just 21% earn that much.
This brings us to the intersection between digital banking and wealth management.
When looking at high-net-worth individuals (HNWI) and private banking customers where incumbents still dominate. For a traditional bank, a mass-market customer is worth $400–500 per year in revenues, while a high net worth individual (HNWI) or a private banking customer can be worth further multiples of this, on average 18k. In 2022, globally, these 22.5m HNWIs generated $400bn of revenue, most of which went to incumbents.
These could change for a combination of trends:
1) HNWIs are changing. More and more of them are tech entrepreneurs that are more interested in strong digital offerings than high-touch private banking models. Also, the "Great wealth transfer" is underway, by 2045, $72tn of wealth will be passed from Baby Boomers and the older members of Gen X to Millennials, which are digital natives.
2) increased demand for alternative investments, private markets (venture capital and private equity), climate-first products (real impact, not mere ESG screening), real estate, collectibles and luxury, and cryptocurrency. We track over 180 startups active in uncloking alternative assets for wealth management. Approaches varies from the direct offerings of these products (e.g. Moonfare platform to access private markets, Carbon equity in private market x climate intersection, but also infrastructure and empowering wealth and asset managers such as bunch.capital “OS for private market investors” and CAIS a financial technology platform helping independent wealth channels with access to alternative investments).
Also relevant here are tokenized assets, especially around security and debt trading.
3) generative AI for wealth management: robo-advisor has been around for a long time with some huge successes like Betterment crossing $2tn of assets and some other bumps on the road. Generative AI holds the promise to replicate the high-touch advice of private banking with a more scalable tech-enabled model so to make it accessible to wider audiences. However, all is yet to be seen, will generative AI be mostly a final wrapper layer after traditional robo advisors to give a bit more explanation and "human" touch? Or will it take the whole customer journey? Will it also bring a new efficiency level in financial research for wealth advisory?
Wealth management incumbents seem to be quite bullish, Bloomberg developed BloombergGPT generative AI model, which will be integrated into the firm’s terminal software, while Morgan Stanley is using OpenAI-powered chatbots to assist financial advisors as a knowledge resource, and Citadel is in the process of getting an enterprise-wide ChatGPT license (even if the claim generative AI is too hyped and they seem to be looking more at software development than financial research).
For more, read the full deep dive on wealth management software by Remus Brett, partner at LocalGlobe.
We will see in the coming months how wealth tech startups will integrate generative AI in their offerings.
Over $22B have been poured into Generative AI companies globally in the last five years, with $15.2 this year alone (even not considering Open AI $10B financing, 2023 has already been the most active year by far). Discover more in our Generative AI guide.
Exits roundup
Public listings (IPOs and SPACs) are at their minimum in the latest years, while M&A is very active and above 2020 levels.
M&A deep dive
In our Q1 update, we discussed in-depth the four types of M&A we saw on the market, expecting further consolidation across those routes:
- bankruptcies & fire sales
- Incumbent acquisition of fintech startups
- startups expanding into new markets or consolidating their lead by acquiring peers
- PE buyouts taking advantage of the challenging public market
A segment seeing increased consolidation is the finance infrastructure one across core banking, Banking-as-a-Service (BaaS) and embedded finance, where M&A was by far the most active ever in the first half of 2023.
In Q1, we saw the once high-flying UK embedded finance and BaaS provider Railsr has been bought by a consortium of its existing investors, and it’s going into administration to restructure. Showing that despite the potential for BaaS and embedded finance market, profitability can be challenging and create pressure in this market environment.
Among the different acquisitions stands out Visa's acquisition of Pismo, a Brazilian cloud-native issuer processing and core banking platform with operations in Latin America, Asia Pacific and Europe, for $1B in cash.
Also, FIS, the fintech giant that runs a wide range of payment, banking and investment services, has acquired Bond, an embedded finance provider which last raised funding in 2020.
Crossing to the embedded insurance space, we also saw Clyde being acquired by Cover Genius.
Other M&A operations which captured our attention included:
Nasdaq buying Thoma Bravo-owned software firm Adenza for $10.5B, the largest acquisition ever by the stock exchange operator. Adenza's risk management and regulatory software is primarily used by banks and brokerages and will help Nasdaq diversify further beyond its roots as an exchange operator. However, the acquisition has raised some eyebrows due to the high price valuing Adenza at almost 18-times its expected 2023 revenue.
Lastly, last month Robinhood also announced its acquisition of credit card startup X1 for $95M. The exact rationale behind the acquisition is not known, but quite likely, a combination of the following factors: diversification of Robinhood offering “broadening [its] product offerings” and “deepening” its relationship with existing customers". It is to be noted that Robinhood revenues grew only 10% in 2022; X1 offers a no-fee reward credit card and recently added the ability to buy stocks by using earned reward points for its cardholders.
Explore more insights on the fintech market on our new fintech digital research page.
Partners
ABN Amro Ventures
Leading fintech corporate venture fund.
ABN AMRO Ventures is the corporate venture fund of ABN AMRO Bank, a leading bank in the Netherlands. The €150m balance sheet fund invests in the most relevant up-and-coming technology companies to boost and accelerate innovation for the bank and its clients.
The collaboration between the fund and the portfolio companies goes far beyond capital: ABN AMRO Ventures actively provides knowledge and expertise, access to the bank and its systems, support from relevant specialists inside and outside ABN AMRO, as well as an extensive external network.
Specialised banking for tech and life science sectors
HSBC Innovation Banking is HSBC's new global, specialised banking proposition for businesses in cutting-edge sectors, such as tech and life sciences, and their investors.
It combines the expertise of the former Silicon Valley Bank UK (SVB UK) with HSBC's international strength in the US, Israel and Hong Kong to enable businesses focused on innovation to compete globally.
HSBC Innovation Banking supports a range of businesses from early-stage growth ones to late-stage public and private corporates, and connects them with its global capabilities, including investment banking, private banking and asset management services.