Fintech
Global financing for financial services has slowed over the past 5 quarters
Over the past five quarters, global lending to private companies in the financial services sector, a major investment sector, has slowed sharply.
In the second quarter of 2024, financial services firms raised $9.7 billion, up slightly from the previous year and 17% from the previous quarter, compared to $8.3 billion invested in the sector in the same quarter of 2023.
However, funding in the last quarter was down 75% from the market peak in the second quarter of 2021, when over $40 billion was invested.
Over the past five quarters, funding for financial services companies has remained below $10 billion each quarter, according to an analysis of Crunchbase data. Those five quarters show the lowest funding amounts for the sector since the first quarter of 2017, which saw $9.3 billion in funding.
While every sector has fallen from its 2021 funding peaks, financial services has shown the largest decline since the slowdown. In comparison, overall global funding this past quarter has fallen 59% from the peak quarter of 2021.
Investor Perspectives
We met with Nigel Morris from QED Investorsa company with a number of fintech companies in its portfolio that went public in 2021, including To put back, SoFi, Cloud Bank AND Fly thread.
Morris acknowledges that it has been difficult to be optimistic over the past three years, as companies have missed revenue targets and focused on cutting costs to get back into shape.
However, after going through austerity, there are six to eight fintechs that can go public if they choose, he said. Morris also expects a more active M&A market, with major fintechs looking to expand products or geography, as well as companies merging to become larger players.
Pending, integrated financial services It’s a sector with great potential, as already seen in the “buy now, pay later” lending model, Morris said.
“The economic ditches in business will be centered around paying bills, insurance and lending,” he said.
Fintech Unicorns
Financial services is the leading sector for unicorns, according to an analysis of Crunchbase data, with more than 390 companies on The Crunchbase Unicorn BoardThese include Group of ants from China, as well as the payment company Bandand neobanks Revolution AND Doorbell. Those last three fintech companies could be looking to be listed in the next year.
Despite the slowing funding environment, several fintechs missed the IPO window in 2021 and have spent the past two years reorganizing their businesses.
Stripe supports it processed $1 trillion in payments in 2023 and Revolut’s revenue in 2023 grew 95% year-over-year to $2.2 billionwith an increase of 12 million new customers.
“The truth is that banks are having a hard time satisfying their customers,” Morris said. “They have outdated technology, they don’t have the kind of verve that a lot of fintechs have. So it’s a really interesting David-versus-Goliath battle that’s going on, and we’re just getting started.”
Related Crunchbase Pro Lists:
Related readings:
Methodology
The data in this report comes directly from Crunchbase and is based on reported data. Reported data is current as of July 21, 2024.
Note that data lags are more pronounced in the early stages of venture activity, with initial funding amounts increasing significantly after the end of the quarter/year.
Financial services is a broad industry group that includes banking, insurance, lending, payments, virtual currencies, and wealth management.
Industries in Crunchbase are not exclusive. A company can be in more than one industry and more than one industry group.
Please note that all funding values are in U.S. dollars unless otherwise noted. Crunchbase converts foreign currencies to U.S. dollars at the prevailing spot rate as of the date funding rounds, acquisitions, IPOs, and other financial events are reported. Even if such events were added to Crunchbase long after the event was announced, foreign currency transactions are converted at the historical spot price.
Illustration: Dom Guzman
Stay up to date on recent funding rounds, acquisitions, and more with Crunchbase Daily.