Funding for the fintech sector here is down 90% during the first half of this year when compared to the same period last year.
€22m was raised, according to a new report by Finch Capital, down from €212m during the first six months of 2023.
Venture and buyout capital in Ireland remains on par with last year’s levels, the State of European Fintech report said, but there was a notable 40% reduction in average fund sizes.
The largest deal done during the period was a €10m funding round for Cork headquartered Zartis.
Finch Capital said the dramatic contraction in fintech was a reflection of broader market trends.
The global sector is suffering amid cautious investor sentiment and economic headwinds, it said.
But it said the situation should recover next year, amid an expected return in investor confidence and increase in deal volumes.
“The challenges that fintech faced in 2023 were necessary for the sector to mature and become more sustainable,” said Mike Brennan, Partner at Finch Capital.
“While funding may be down overall, and unicorn chasing has slowed, there is plenty of opportunity for companies that are capital efficient and have a clear path to profit.”
In Europe, the total capital invested in European fintechs in the first half fell by a quarter, from €3.8 billion in the first six months of 2023 to €2.9 billion in the first half of this year.
The study also says there are early signs of recovery in Europe’s fintech jobs market.
It has expanded by 10% year-on-year, suggesting that sectoral resilience could support a rebound in investment activity.
The UK accounted for two thirds of the total volume of deals, while the Netherlands also showed resilience with volumes remaining steady.
Ireland was accompanied by France in Germany in offering Government supported initiatives that aimed at building growth.
“With AI transforming the industry and significant dry powder still available, the next 12-18 months will mark a turning point for fintech in Europe,” said Mr Brennan.
“The next wave of fintech success stories will likely be built on sound financials rather than rapid revenue growth alone. The next wave of fintechs is shifting from unicorns to ‘half-a-corns,’ with £500m valuations becoming the new benchmark.”