Funding for Irish fintech companies saw a significant decline in the first half of this year with just €22 million invested as the sector globally faces cautious investor sentiment, according to a new report.
According to the State of European Fintech report published by investment firm Finch Capital, funding for the Irish fintech sector reached €22 million between January and June. That excludes a single major outlier deal struck in March, which saw Dublin-based software company SoftCo acquired by private equity firm Keensight Capital in a deal thought to be worth more than $100 million euros.
This compares to 212 million euros recorded during the first six months of 2023.
One of the largest deals completed so far this year is a €10 million funding round for Cork-headquartered Zartis.
The report said this contraction reflects broader market trends, as the global fintech sector faces “economic headwinds and cautious investor sentiment.”
The report expects investment in the sector to increase steadily in 2025 as confidence returns with increasing transaction volumes.
Finch Capital partner Mike Brennan said the challenges the sector faced in 2023 were necessary for it to mature and “become more sustainable”.
Across Europe, the UK has increased its dominant role in the region’s fintech sector, accounting for two-thirds of the continent’s total deal volume in the first half of this year.
Total capital invested in European fintech companies in the first six months of the year fell 25% to €2.9 billion.
The report also reveals that funding cycles for fintech unicorns have slowed, with investors prioritizing companies with strong financial fundamentals and avoiding overly ambitious valuations based on hypergrowth and unproven profitability.
He also said there were early signs of recovery in Europe’s fintech jobs market, which grew by 10% year-on-year. The report said this suggests that sectoral resilience could support a rebound in investment activity, reversing the contraction seen in previous years.
With many companies now seeking developments in the AI space, Mr Brennan said the next 12 to 18 months will mark a turning point for fintech in Europe.
“The next wave of fintech success stories will likely rely on strong financial data rather than rapid revenue growth alone. The next wave of fintechs is moving from unicorns to “half-horns”, with valuations of £500m (€600m) becoming the new benchmark.