Insight & Analysis

New Fintech VC funding records smashed as 2018 deals push US$40bn

Published: Feb 2019

Financial technology start-ups raised US$39.57bn in venture capital (VC) funding last year. That’s a 120% increase on 2017.

It was a record-breaking year for fintechs attracting VC money last year, according to research provided by CB Insights, a tech-market intelligence platform.

Globally, the research firm’s ‘2019 Fintech Trends to Watch’ reported 1,707 VC deals with fintechs struck in 2018, adding up to US$39.57, a rise of 120%. The number of deals increased 15% from 2017’s 1,480. The number of unique investors reached 2,745, CB Insights noting an increase in the number of corporate investors now getting involved.

The overall funding increase was boosted by 52 deals valued at over US$100m, these accounting for US$24.88bn of total investment. One such deal, the US$14bn investment in Ant Financial (the payment wing of Chinese e-commerce giant Alibaba Group), represented 35% of the entire total for the year. Q4 2018 also notably brought five so-called fintech ‘unicorns’ to prominence (each now valued at more than US$1bn), including credit card provider Brex, digital bank Monzo and data aggregator Plaid.

It seems the smart money is heading to more established players, as early-stage deals fell to a five-year low. Although global seed and Series A fintech deals in 2018 rose by 5%, as a percentage of total deals they declined to 57%.

Global trend

Geographically, the biggest hike in deal values was seen in Asia, growing 38% over 2017, with a record value of US$22.65bn. US fintechs brought in a record-breaking US$11.89bn through 659 investments. Europe dropped away slightly in deal numbers, down to 367, but still managed record funding of US$3.53bn.

South America broke two new records with funding, hitting US$540m from 55 deals. CB Insights reports that investment in the second half of 2018 was marred by regional social, political and monetary conflicts. Even so, Brazilian digital bank and credit card operator, NuBank, South America’s first unicorn, secured US$90m from Chinese multinational investment holding conglomerate, Tencent.

Breaking down VC-backed fintech funding by region, between 2014 and 2018, showed the rise of certain geographies. Obviously, some do so from a low base but this indicates a shift from the traditional hubs’ prominence. Australia saw a 396% rise in deals, and Africa a 376% gain. Asia rose by 265% (excluding the two huge Ant deals – 2016’s £4.5bn and 2018’s US$14bn). South America climbed by 167%, with North America by 43% and Europe by 24%.

Bank hesitancy

One of the key areas of interest for Treasury Today readers will be the level of activity in the banking sector. The report notes that “despite new challengers, banks look to build rather than buy”.

With banks launching a number of digital products and boasting of their digital credentials, the industry saw just 20 fintech acquisitions in 2018. CB Insight analysis suggests that “regulatory barriers, legacy tech infrastructure, cultural barriers and reluctance to carry inflated goodwill values on balance sheets” will be ongoing challenges for the industry as it looks for suitable fintech investments.

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