[eMarketer] Continued decline in fintech funding signals harsher climate for startups

Global fintech funding dropped by one-third in Q2 to continue a trend of declining investing this year, according to CB Insights data.

New data paints a picture of dwindling financing for fintech firms. But this fits in with a wider trend of lower total global funding, which fell 23% QoQ for Q2 to hit $108.5 billion, the largest quarterly percentage drop in nearly a decade.

Record-high inflation, the war in Ukraine, and fears of a looming recession are all slowing deal activity. Technology firms have been hit particularly hard after attaining record levels in 2021.

Fintech funding was arguably at an unsustainably high level last year. Growth was always going to tail off, if not diminish. But greater economic uncertainty has halted the frenzy of investing, and fintechs will have to tighten their belts for a harsher H2 2022 funding climate.

eMarketer argues that the fintech funding decline mirrors patterns within other industries, but this doesn’t mean it isn’t a cause for alarm for the sector. Investors’ hesitancy to close deals means fintechs may have to cut costs, scale back expansion plans, and proceed cautiously in a tougher H2 2022. Some will be proactive in doing this to avoid being forced into a down round if they do attract funding. Those that don’t will struggle to draw funding from increasingly wary investors. Firms that fail to adapt could face the prospect of folding before the end of the year.

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