The fintech industry suffered even more in 2023, with worldwide investment plummeting by half as rising interest rates and worsening macroeconomic conditions forced investors to tighten their belts, according to global investment estimates provided exclusively with CNBC.

According to data from Innovate Finance, a financial technology industry association, investment in fintechs fell by 48% last year to $51.2 billion, compared to $99 billion in 2022. The total number of fintech fundraising deals fell by 61%, to 3,973 in 2023 from 6,397 in 2022.

Despite the decline, the United Arab Emirates stood out on Innovate Finance’s funding list.

According to Innovate Finance, overall investment in the UAE increased by 92% in 2023, owing to more fintech-friendly policies and the region’s growing usage of digital banking and other tools.

According to Innovate Finance, this is the first time the UAE has been among the top ten most well-funded fintech hubs in 2023. Last year, there were more Asian and Middle Eastern countries in the top ten than European nations, according to the group, as some big European economies, such as France and Germany, fell down the rankings.

“Some of the markets now adopting this technology, we’re seeing that reflected in investment numbers,” Innovate Finance CEO Janine Hirt told CNBC earlier this week.

Hirt observed that the momentum in Asia and the Middle East provided a chance for the United Kingdom to strengthen cooperation and relationships with governments in those regions. “We are seeing appetite and real momentum coming from a lot of hubs in Asia,” she went on to say.

Regarding the slowdown, Hirt stated that growth-stage companies were the most likely to be impacted by the funding slump in 2023, although seed-stage and early-stage firms were more resistant to similar pressures.

“If you’re a later-stage company, you might not be going out for a raise right now,” Innovate Finance’s CEO said, adding that early-stage fintechs did well in the market last year, raising around $4 billion. “That’s a really positive sign,” she added.

“What is a testament to the strength of our sector is that deal sizes are very, very healthy,” Hirt said. “Globally, and in the U.K., investment in seed, Series A and B fintechs has normalized, which is a testament to the strength of investors,” she added.

Financial technology has seen its share of gloom over the last year, with growing wars between Russia and Ukraine and Israel and Hamas, continued geopolitical tensions between the United States and China, and broader uncertainties influencing financial markets, such as increased interest rates.

The International Monetary Fund expects global economic growth to fall to 3% in 2023, down from 3.5% in 2022.

Innovate Finance also reported that the United Kingdom was the second-largest centre for fintech investment in 2023, with total funding for the country’s financial technology industry totaling $5.1 billion, a 63% decrease from $13.9 billion in 2022.

According to Innovate Finance, the United Kingdom has received more fintech investment than the following 28 European countries combined.

London fintechs raised $4.5 billion last year, and the city continues to lead in fintech fundraising across Europe.

However, overall funding in the UK capital fell by 56% from 2022.

Meanwhile, female-led fintechs in the United Kingdom closed 59 agreements worth $536 million last year, accounting for 10.5% of the total, which the organisation described as a “step forward” for female founders and CEOs.

“I think, ultimately, the U.K. is still very much a global leader in fintech,” Hirt told CNBC. It’s the European leader.”

But, she added, “We can’t afford to rest on our laurels. It’s critical to build on the momentum we’ve had over the past few years. We need government support and regulation that is effective and efficient and proactive.”

“For us, a focus going forward is making sure we do have proper regulation in place that allows fintechs to thrive, and allows SMEs [small to medium-sized enterprises] across the country to benefit from these new innovations as well.”

“Cracking on with new regimes for stablecoins, regimes for crypto, open banking and finance — these are all areas we’re hopeful we’ll see progress in in 2024.”

The United States, predictably, was the largest country for fintech investment, with total investment totaling $24 billion, while financing levels remained low from 2022, with fintech firms raising 44% less in 2023 than they did a year earlier.

India ranked third behind the United Kingdom, with fintech investment totaling $2.5 billion last year, Singapore fourth with $2.2 billion, and China fifth with $1.8 billion.

The top five biggest deals globally in 2023 were worth more over $9 billion, accounting for around 18% of total global investment in the area.

Stripe raised the most money, $6.9 billion, according to the data, while Rapyd, Xpansiv, BharatPe, and Ledger secured the second, third, fourth, and fifth-largest investment agreements, respectively.

(Adapted from CNBC.com)