I nterest in artificial intelligence (AI) is growing rapidly in the financial technology (fintech) sector, according to a recent report by KPMG. This trend is particularly noticeable in the Americas, where several significant AI-related deals took place in the first half of 2024 (H1’24).
In the United States, notable transactions included:
- Cyber insurance company Corvus being acquired by Travellers for $427 million.
- Compensation-focused platform Spiff being acquired by Salesforce for $419 million.
- Corporate management company Ramp raising $150 million in venture capital (VC).
- Investment management platform FundGuard raising $100 million in VC funding.
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Additionally, China-based AI-powered sustainability data company MioTech raised $150 million in VC funding during the first half of 2024. These substantial investments highlight the increasing importance of AI in driving innovation and efficiency in the fintech space.
Global Fintech Market Faces Hurdles
The global fintech market faced significant challenges in the first half of 2024. High interest rates and geopolitical uncertainties contributed to a decline in overall investment. Total global fintech investment, which includes venture capital (VC), private equity (PE), and mergers and acquisitions (M&A), fell from $62.3 billion across 2,287 deals in the second half of 2023 (H2’23) to $51.9 billion across 2,255 deals in H1’24. This decrease reflects the cautious approach investors are taking in the current economic climate.
AI: A Beacon of Hope in Fintech
Despite the overall downturn, AI remains a bright spot in the fintech sector. Companies are increasingly looking to AI to develop new solutions that enhance financial services, improve customer experiences, and increase operational efficiency. AI’s potential to transform the industry is attracting significant interest and investment, even amid broader market challenges.
Outlook for the Second Half of 2024
Looking ahead to the second half of 2024 (H2’24), fintech investment is expected to remain cautious. The high interest rate environment, coupled with the high cost of capital, and the upcoming US presidential election are likely to keep investments subdued. However, AI is expected to remain a key area of interest as startups develop AI solutions tailored specifically for the financial services sector.
There is some optimism about an increase in deal volume, though the average size of deals is expected to remain smaller compared to historical averages. Early-stage deals, in particular, are anticipated to provide a glimmer of hope for the fintech sector. Investors are likely to focus on smaller, more innovative companies that can offer unique AI-driven solutions to the market’s current challenges.
While the global fintech market faces significant hurdles, the growing interest and investment in AI provide a promising outlook. As companies continue to leverage AI technology, the fintech sector may see renewed growth and innovation in the coming months.
