HomeNewsFintech Funding Fell 33% QoQ and 46% YoY to $20.4B in Q2’22
Fintech Funding Fell 33% QoQ and 46% YoY to $20.4B in Q2’22

Fintech Funding Fell 33% QoQ and 46% YoY to $20.4B in Q2’22

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Financial Technology (Fintech) is an umbrella term describing the various innovative technologies and services emerging in the financial sector. It provides new opportunities for people to access financial services, save money, and make investment decisions. The industry has seen a decline in funding in the second quarter of 2022, raising concerns about its future.

According to a MoneyTransfers data presentation, Fintech funding has fallen to its lowest level in nearly two years. The site concludes that the sector raised $20.4 billion in the second quarter of 2022, a 33% decline from the previous quarter. That figure also represented a 46% slump from the same period a year earlier. The deals in Q2 2022 also fell 17% to 1,225, the lowest quarterly total since the fourth quarter of 2020.

What’s Behind The Declining Fintech Funding?

MoneyTransfers CEO Jonathan Merry has had his take on the data. He affirms,

Many startups are facing pressure to achieve profitability amid a challenging economic environment.” He adds, “The main reason for the decline in Fintech funding is the overall slowdown in the economy. With businesses and consumers cutting back on spending, investors are less likely to take risks on new and unproven Fintech companies.

Jonathan Merry

Another factor that may play a role is the increasing regulatory scrutiny of the Fintech sector. Fintech companies have become more powerful, and regulators have begun to look closely at their activities. This has led to some investors becoming skittish about investing in Fintech companies.

Mega-round Funding Dropped Sharply

Funding for global mega-rounds dropped sharply in the second quarter of 2022, reaching its lowest point since the fourth quarter of 2020. According to MoneyTransfers’ analysis, 55 deals raised $9.7 billion in the second quarter, a 45% decrease from the year’s first quarter.

The three largest rounds of funding went to Coda Payments (Singapore), Velocity Global (US), and Circle (US). While the overall trend in mega-round financing is positive, the sharp drop in the second quarter suggests investor confidence may be waning.

The US Fintech Sector Led in Global Funding

The US fintech industry took a hit in the second quarter of this year, with funding dropping 37% from the previous quarter and 43% from the same period last year. However, despite this setback, the US still accounted for 42% of total global fintech funding in Q2’22 and 38% of all fintech deals.

One possible reason for the drop in funding is the increasing regulation of the fintech industry. In the US, the SEC has proposed stricter regulation of firms offering digital assets, making investors more cautious about investing in fintech companies. Another factor could be the overall slowdown in the venture capital market, as investors are becoming more risk-averse.

The Future Remains Bright

Despite these challenges, there are still many reasons to be optimistic about the future of US fintech. The industry attracts talent and investment, and several promising startups are making waves. So while Q2’22 was a challenging quarter for US fintech, it’s important to remember that this is just a temporary setback.

Elizabeth Kerr
Elizabeth Kerr
Elizabeth is a financial content specialist from Manchester. Her specialities include cryptocurrency, data analysis and financial regulation.