Global Fintech Funding: Continued Decline or Recovery?

While the financial sector is still largely dominated by traditional financial institutions, fintechs are rising up, involving insurtech, investment, lending, banking and more, to take the industry by storm. Services such as digital banking, buy-now-pay-later (BNPL), and payment are thriving in all markets.

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Rough statistics of Fazzaco's "FinTech​" labeled stories show that almost over 90% of them are about some startups successfully raising money. It can be seen that fintechs remain the most funded type of companies in the market.

A super fund magnet

IPOs: In June 2021, the U.S-based payment firm Marqeta went listed on Nasdaq, wrapping up the first day with a 13% share price increase, and a market cap topping US$16 billion; in October 2021, Paytm, an Indian payment firm, had a US$22 billion worth of IPO​, which outvalues every other IPO ever in the history of the country; and by late October 2021, the South Korea-based payment company Kakao Pay closed its IPO with approximately US$ 1.3 billion raised.

Digital banking: In August 2021, the U.S-based digital bank Chime received US$750 million in Series G; in October 2021, German digital bank N26 received US$900 million in Series E​, with the company's valuation exceeding US$9 billion; in February 2022, the Brazilian digital bank Neon received an investment of up to US$300 million from the (Banco Bilbao Vizcaya Argentaria) BBVA​.

In other aspects: in August 2021, Nigerian mobile payment provider Opay completed a US$400 million Series C​; Argentina-based fintech Uala received a US$350 million Series D, with a company valuation of US$2.45 billion; In February 2022, the soon-to-be-listed Indian fintech startup Pine Labs announced a $150 million investment from Alpha Wave Global, bringing the total raised over the past seven months to about $870 million.

Is the magnet somewhat becoming less attractive since 2022?

Fintechs funding totaled US$28.8 billion at the end of March 2022, down 18% from the previous quarter. However, the number of cases rose, reaching 1,399, an increase of 7%. In terms of amount, the beginning of 2022 didn't kick off that well, and the decline of funding amount is the sharpest in the filed since 2018.

In addition, the total number of super funding cases, where more than 100 million USD are raised, is 75, totaling US$16.3 billion, in the first quarter of 2022, showing a downward trend as well.

From a regional perspective, fintech funding in Asia shows the sharpest decline, which has shrunk to US$4.8 billion, a drop of 44% compared to the previous quarter. But similarly, the number of deals in the region rose to a record 388, up 6%, broadly in line with global trend. The reason may be that the funding in Asia has shifted to become smaller and inclined to earlier rounds.

Can it make a comeback in the second quarter?

Although the performance of global fintech funding in the first quarter of 2022 was quite disappointing, we seem to see some signs of recovery from April to May.

In May, fintech investment slightly recovered from the prior quarter's low, with startups funding reaching US$7.3 billion this month, up 14% from $6.4 billion in April.

Fazzaco, too, has also observed a number of investment deals, such as UK digital bank Kroo raising $33 million​ in Series B funding this month; German sustainability-as-a-service solutions provider ecolytiq completed €135 million​; and open banking provider Bud secures $80M Series B from TDR Capital​.

VCs stepping down while Africa becoming popular

​The data of the first half of 2022 shows that fintechs are increasingly valued by non-VCs in terms of investment, including asset and investment management companies and angel investment. Among them, Tiger Global Management is still the most active fintech investor, and the number of deals they had far exceeds that of Global Founders Capital, the largest fintech venture capital investor.

On the other hand, while the US and Asia still lead the world in terms of number of companies and funding amount, there is no denying that Africa has also come on board and become a force to be reckoned with. In the first quarter of this year, there were 69 fintech funding cases in Africa, an increase of 44% over the previous quarter, with an investment amount of US$293 million. Fazzaco has conducted a couple of researches on the African fintech market. For more information, please read "Strategic Techniques to Dominating the African Forex Market​" and "Fintech Landscape in Africa​".