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A new report found that funding and employment in the financial technology sector in Massachusetts improved from 2020 to 2022. However, there is still room for improvement in diversity and inclusion, collaboration between industry stakeholders and partnership with regulators.

The Massachusetts Technology Collaborative (MassTech) and the Massachusetts FinTech Hub commissioned consultancy KPMG to write the report.

The report said that employment in fintech-related industries in Massachusetts rose to 231,000 in December 2022 from 197,000 in January 2020, led by gains in credit unions, colleges/universities, software publishers and investment banking and securities intermediation.

Fintech funding in the state also increased by a compounded annual growth rate of over 40 percent from 2020 to 2022. Massachusetts was also the fourth largest state with fintech funding received by fintech companies – trailing behind California, New York, and Florida.

“This report demonstrates that Massachusetts has been able to successfully establish a dynamic and thriving innovation hub that is well-positioned to compete with other financial centers around the world,” Carolyn Kirk, executive director of MassTech, said in a statement. “We look forward to building on this progress by listening closely to the feedback from the report and identifying ways to boost our fintech ecosystem in Massachusetts, so that we can become the leading global hub for fintech.”

Through survey and focus group discussions among industry stakeholders and regulators, researchers said they identified key steps needed to improve the fintech industry in Massachusetts.

Stakeholders are calling for more diversity and inclusion in fintech talents that will help broaden perspectives and improve idea generation and innovation in the space, the report said.

Despite being the fourth-largest state in the nation by fintech funding, there is still a lack of awareness among stakeholders of funding opportunities and capital access, it added.

The report also noted that there need to be increased opportunities to interact with policymakers and regulators to advance fintech developments, as well as the need for a “regulatory sandbox” where startups can test fintech products and services without having to comply with regulatory requirements to provide a supportive environment for new ideas to grow.

The Massachusetts fintech industry would benefit from the improvement of interconnectivity among fintech stakeholders, and providing them with targeted information and resources, and access to new technologies to create a more collaborative and supportive fintech ecosystem, the report noted.

“This reassessment serves as a testament to the astounding progress in fintech innovation across the Commonwealth over the last four years and through a global pandemic – from the formation of the FinTech Working Group in early 2020 to the launch of the Mass Fintech Hub in 2021, to where we are now,” Mike Fanning, Mass Fintech Hub co-chair and former head of MassMutual U.S., said in a statement. “We are excited to utilize key findings from this report to inform the direction of our programming and initiatives, and help us reach new heights in 2024 and beyond.”