Fintech-inclined VC fundraising dropped 91% since its peak in 2021, with funds raising $5 billion through September. Announced funds, including those that have not yet closed, totalled $9 billion, the lowest since 2020. Just one in 12 VC dollars went to a fintech company in 2024, down from one in five dollars in 2021, says the report. Deal flow has shifted toward the early stage, with more than three seed investments for every one Series A. In 2021, fintech deals over $100 million accounted for 65% of activity in the sector. In 2024 this number has dropped to 34%. VC firms have slowed their pace of deployments in fintech. In 2021, the most active 100 US fintech investors were closing more than two deals per month. That pace has dropped to less than one deal per month this year.

However, AI is providing a bright spark: Since 2021, mentions of AI in fintech corporate earnings calls have increased 4x. Native AI companies in fintech create more value per dollar invested than legacy/first-generation fintechs (median for 2024 VC deals was 4.0x for native AI versus 2.7x for legacy/first gen AI). Nick Christian, head, national fintech and specialty finance, SVB, says: "While fintech companies face challenges, we anticipate broader recovery in investment to begin in 2025 as we continue to see opportunities for the industry. "For example, US fintech companies are becoming more efficient with nearly 80% of fintech companies improving EBITDA margins year-over-year and nearly 30% now having six to 12 months of runway left, up from 20% last year. "At the same time, generative AI is opening possibilities for value creation in fintech - whether it’s legacy companies improving efficiencies by reducing labour costs, or AI-native companies building novel solutions."