Investment in Irish fintechs fell by more than a third last year

Irish fintechs attracted just over $1 billion (€940 million) in investment last year, but the figure was down almost 37 per cent compared with 2021, according to a KPMG report on the sector.

There was a large drop in investment from the third quarter, which totalled seven transactions worth $741 million, to the fourth quarter, which saw investment of just $1.47 million across two transactions.

KPMG noted the drop off came as interest rates and input costs across the eurozone continued to increase.

Deal numbers also dropped from 21 in the first half of 2022, to just nine in the second half. Excluding one large transaction, the period saw investment of just $66 million, a significant drop-off from $259 million in the first half of the year.

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That being said, Irish fintech recorded a value increase in investment in the second half of 2022, with investments and transactions reaching $742 million. That was up significantly on the first half, when investment and transactions totalled $259 million.

However, the increase was significantly skewed by one major transaction – namely, the purchase of Cork-based payments firm Global Shares for $676 million by JP Morgan Chase, the world’s largest bank by market capitalisation.

Global Shares manages employee equity plans for companies in the start-up and tech space.

Another notable transaction during the second half of 2022 was the $60 million raised by Dublin-based tax automation group Fonua in venture capital funding. Fonua was founded three years ago by three Uber alumni.

Anna Scally, head of technology and media at KPMG, said investors may be inhibited by rising interest rates.

“With interest rates rising, valuations will be under pressure for some time,” she said. “This may inhibit some of the larger potential M&A transactions as investors wait to see if prices reduce further.

“That said, M&A activity will likely increase for smaller size deals as corporates and larger fintechs take advantage of competitive valuations. We also expect that good businesses with a unique product or service will continue to attract investment from international players.”

KPMG head of financial services Ian Nelson said all sectors are facing higher costs across Europe.

“Notwithstanding these pressures, we expect investment in areas such as regtech and payments to continue to flourish, as businesses, including other fintechs, seek solutions to address the changing regulatory environment and consumers increasingly looking beyond traditional banking products and services,” he added.

The total level of Irish fintech activity in 2022 stood at $1.025 billion, a decrease of over a third from the $1.62 billion invested in 2021.

This follows the global trend, where fintech investment globally dropped to $164.1 billion across 6,006 deals in 2022, down from a record high of $238.9 billion across 7,321 deals in 2021.