The fintech scene has not just heated up in the last few years, it has set ablaze – with new innovations, technologies and business models. The proof lies in the numbers. In the last few years, the floodgates to billions of dollars of investor backed funds have swung open and submerged the fintech landscape globally. Since 2012, global investments into fintech have been roughly $234.2 billion. Out of this, 81.7% of investments have been made in the last 5 years.
A major tipping point in fintech investments was seen in 2018 where financial technology fundings surged to $55.3 billion, a 100% increase from the previous year. The surge was largely attributed to 52 mega-rounds, with investments larger than $100 million. The funding of Ant Financial, the payment affiliate of the Chinese e-commerce giant, Alibaba, also bagged $14 billion in 2018, accounting for 25% of the investment value globally.
In 2019, though the global investment value dropped, with $42.9 billion invested in financial technology, the number of deals grew by 6.8%. This spurt of greater deals only echoes the global climate in financial technology that wasn’t going to slow down soon. Investments in 2019 were primarily led by gains in the US, UK and emerging economies like India and Brazil according to Accenture.
In the US, the value of deals jumped 54% to $26.1 billion, with a major portion of the funds flowing into lending startups (26%) and payments startups (26%). While on the other side of the Atlantic, UK investments into fintechs touched $6.3 billion, a 63% rise. Brazil was not one to shy away from investments in 2019, as funding tripled to $1.6 billion, helping the country rise up the ranks on the global leaderboard as the 5th largest fintech fundraising center. In Asia Pacific as well India doubled its fintech funds to $3.7 billion, becoming the third largest fintech market.
Fast forward to 2020, amidst a world that had just been jolted into a global pandemic, funding and deals in the financial technology ecosystem declined by marginally by 2% to $42.1 billion. Though fintech investments dampened in the first half of 2020, it surely began to pick up and resuscitate in the latter. This is reflected in the deal activities that shot up 11% quarter-over-quarter in Q4’20.
2020, saw a more varied distribution of the investment dollar. As 2020 shifted into the second half promising better yields, North America and Europe marked larger gains. Overall in 2020, the US led the pack once again, accounting for $22 billion in fintech investments. The European continent continued to grow and was dominated in investment fundings by the UK that accounted for $4.1 billion in funding. While in Asia, a drop in fundings overshadowed the gains globally.
As some countries placed the brakes on fintech fundings, South America witnessed an acceleration that hasn’t slowed down since 2016. The total funding stood at $1.8 billion, with companies growing at a 64% CAGR. 40% of deals during this period went to alternative lending and payments companies.
Globally, the payments sector raised over $12B in 2020, a year-on-year increase of 3%. Fundings siphoned to digital banking startups also increased by 12% year-on-year. Another interesting category of startups that began to gain traction amid the pandemic fuelled e-commerce boom were – ‘Buy now, pay later’ (BNPL) startups that marked a record high funding in 2020. The funding grew at an astounding pace of 93% CAGR from 2016 – 2020.
2020 also conceived several fintech Unicorns across the global like – Next Insurance, Chainalysis, Better.com in the US, Wealthsimpl in Canada, Razorpay in India, Creditas in Brazil among several others.
The past few years are evidence that the fintech ecosystem is on a funding spree catalysed by innovative startups being built to service modern needs. Even the global pandemic couldn’t douse the burning spirit of the sector as new business models began to emerge. Entering 2021, we already see the industry ramping up its investments once again as the first quarter is projected to reach a $15 billion funding – much higher than any other quarter since Ant Financial’s funding. Mega-rounds are at a new record breaking high, with 33 rounds already in action as of the beginning of March. There’s no doubt that the future for fintech is bright. It’ll be thrilling to see how the sector plunges back into growth as it sparks a newfound boom.
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