Macro market headwinds impact the sector
The fintech sector has not escaped the impact of the deteriorating global macroeconomic environment of 2022. Valuations have declined, access to capital markets has become more limited and pressure on margins and profitability has increased. The sector is also being impacted by the overhang of the “Crypto Winter” of 2022 – involving a significant crypto market crash and the collapse of several high profile stablecoins and crypto exchanges – which looks set to continue well into 2023.
Nevertheless, 2022 was still the second highest ever year for tech and fintech investment generally, and in 2023 we expect some fintech M&A and market consolidation. Fintechs that are continuing to invest in fast-paced growth and expansion will be looking for access to capital. Market conditions are creating increased interest in private placements, although well-established fintechs will still have a longer-term focus on IPO opportunities, including the ongoing debate over preferred listing venues.
Whilst crypto markets have been hit hard, there is still plenty of interest in the digital assets space from established financial institutions and other corporates who are increasingly accessing fintech ideas and technology via strategic investments, collaborations and partnerships. In particular, many high-profile players are partnering with tech companies to diversify their offering into digital products, including NFTs.