FinTech startups' funding fell to its lowest level in recent years during Q1 2026, with only 762 deals recorded. However, funding amounts remained relatively stable, with investors concentrating on established fintech firms like cryptocurrency companies and digital banks. The era of rapid M&A activity has ended, with investors becoming more selective about allocation. Banking sector late-stage funding comprised 35% of deals, more than double historical averages, while total banking deals dropped to 34 (the lowest in many years) and funding amounts fell from $1.8 billion to $932 million year-over-year.

Investment capital is flowing toward companies competing directly with banks for deposits and customer relationships rather than bank partnership models. Digital asset companies command notably higher valuations, averaging $6.4 million—nearly double the fintech sector average—reflecting strong investor confidence in select high-potential firms amid market contraction.