Funding for the fintech sector here declined by 90% in the first half of this year compared to the same period last year.
€22 million was raised, according to a new report from Finch Capital, compared to €212 million in the first six months of 2023.
Venture capital and buyout capital in Ireland remain at last year’s levels, the State of European Fintech report says, but there has been a notable 40% reduction in the average size of funds.
The largest deal completed during the period was a €10 million funding round for Cork-headquartered Zartis.
Finch Capital said the dramatic contraction in the fintech sector was a reflection of broader market trends.
The global sector is suffering from cautious investor sentiment and economic headwinds, he said.
But the situation is expected to improve next year, amid an expected return of investor confidence and an increase in trading volume.
“The challenges fintech faced in 2023 were necessary for the sector to mature and become more sustainable,” said Mike Brennan, partner at Finch Capital.
“While funding is down overall and the hunt for unicorns has slowed, there are many opportunities for companies that use their capital efficiently and have a clear path to profit.”
In Europe, total capital invested in European fintechs in the first half of the year fell by a quarter, from €3.8 billion in the first half of 2023 to €2.9 billion in the first half of this year.
The study also indicates that there are early signs of recovery in the European fintech job market.
It rose 10% year-on-year, suggesting that sectoral resilience could support a rebound in investment activity.
The UK accounted for two-thirds of the total trading volume, while the Netherlands also showed resilience, with volumes remaining stable.
Ireland was accompanied by France in Germany by proposing government-backed initiatives aimed at strengthening growth.
“With AI transforming the sector and a significant amount of dry powder still available, the next 12 to 18 months will mark a turning point for fintech in Europe,” Mr. Brennan said.
“The next wave of fintech success stories will likely rely on strong financials rather than rapid revenue growth alone. The next wave of fintech companies is moving from unicorn to half-horn status.” , with valuations of £500m becoming the new benchmark.”