Updated Jan 10 to reflect the SEC's approval of 11 Bitcoin spot ETFs in final paragraph.

Hey fintech friends,

Trends that went out in 2023: Low interest rate expectations, crypto fraud, 2-3 day ACH settlement windows, shoulder pads, and bank failures (... we hope).

What’s in for fintechs in 2024: EBITDA, generating yield on idle cash, Open Banking mandates, and Buy Now, Pay Later profitability.

In this edition of our quarterly Signals Roundups, we’ll dive into fintech activity in Q4, review overall activity in 2023, and highlight the biggest trends for fintechs going into 2024. For new readers, Signals is the premium subscriber edition of TWIF designed to get you away from the headlines and to explore the larger trendlines. Each quarter, we break down four key questions on fintech activity:

1. Which concepts are getting funded? 
2. Where are exits, M&A, and SPACs concentrated? 
3. Which firms are raising debt and venture funds for fintech? 
4. Which products were launched over the last quarter? 

If you haven’t already, subscribe to future editions here!

Overall activity

Fintechs raised $7.21 billion in Q4, closing out 2023 with $28.7 billion in total equity funding across 942 deals. Q4 funding represents a 61% QoQ rebound, but total funding in 2023 was still down 45% from the prior year– driven by a 33% drop in the number of deals closed and average deal size shrinking 19% YoY.

Global tech funding hit a 5-year low in 2023, immediately impacting fintechs of all sizes: 17% of fintech raises are now down rounds; the overwhelming majority of companies in the FinTech IPO Index continue to trade below IPO price, and a 25% spike in fintech layoffs in 2023 cut roles for over 16,200 employees.

On the flipside, renewed focus on financial health (vs. growth at all costs) started to bear out in fintechs’ performance towards the end of the year. The Fintech IPO Index ended 2023 up 55% on H2 earnings reports that reprioritized profitability over growth in 2024. We’ll explore these strategies further below.

Stay tuned for news on the biggest fintechs that could go public this year: Stripe, Klarna, Chime, Plaid*, Starling, and Apex (👀 the clearing infrastructure company just confidentially filed for IPO in December).

Let’s dive into fintech activity in Q4, the biggest overall trends in 2023, and what these trends indicate for fintechs in 2024.