VC Funding for Retail FinTech Market Drops 38% Amid Tariff Concerns

Venture capital (VC) funding for the retail FinTech market dropped 37.8% in the first quarter compared to the previous quarter, PitchBook said in a report released Thursday (May 1).

The decline was driven by concerns about tariffs and inflation, which overwhelmed earlier optimism around the adoption of artificial intelligence and the President Donald Trump administration’s regulatory softening, according to the report.

The first quarter’s VC funding for the retail FinTech market totaled $1.9 billion, the report said. Of that, $1.3 billion went to the credit and banking segment and $275.3 million went to WealthTech.

The median pre-money valuation for the retail FinTech sector in the first quarter fell 41.2% compared to the full-year 2024 figure, per the report.

The steepest decline was seen in the pre-seed/seed stage, while venture growth saw a 62.9% increase driven by “outliers” like Klarna’s $12 billion valuation, the report said.

“With mounting tariff-related headwinds and heightened consumer-sector vulnerability, we expect funding to remain restrained through mid-2025, as evidenced by suspended IPOs from Klarna and eToro, and the steep 47.8% drop in quarterly exit count,” the report said.

It was reported April 4 that several technology and FinTech companies, including Klarna, paused their activities related to IPOs amid a fall in the stock market and uncertainty caused by tariffs.

Klarna had publicly filed a registration statement on Form F-1 with the Securities and Exchange Commission relating to a proposed IPO only weeks earlier, on March 14.

As of April 4, the market valuation of one of Klarna’s biggest competitors in the United States, Affirm, had slid to a level lower than Klarna’s target in its IPO after Affirm’s shares dropped 46% since the beginning of the year.

On April 8, it was reported that the new tariffs rocking the global stock market had shifted the mood inside Silicon Valley VC firms, even though it was earlier thought that IPOs would flourish in 2025.

Investors said tariffs are likely to affect startups dealing with hardware and international trade, such as eCommerce businesses, while AI companies could face higher computing costs.