Despite a large retreat in investor activity at the outset of COVID-19, the second quarter of 2020 has seen a rebound in Fintech funding, with activity increasing by 17%. This increase is reflected in North and South America, Europe, Africa, and Australia. Asia, however, emerged without a rebound, reporting a 37% reduction.
According to a new report published by CB Insights, Fintech funding rose from $7.9 billion to $9.3 billion in Q2. Furthermore, “COVID-19’s boost to e-commerce growth” was attributed as being a “tailwind” for Fintech providers. Josh Collison, co-founder and President of Stripe, stated that “there has been a very sharp move from the offline economy to the online economy.”
With digital commerce growing rapidly as a response to the pandemic, Shopify’s growing payments revenue illustrates the potential of embedded Fintech in e-commerce. CB Insights went on to note that “reducing payments friction is key as retail spending stays elevated.” Adding to this is the increased need for digital banking as widespread lockdowns supplement a broad ecosystem for services supporting next-gen digital banks. With Big Tech wanting pieces of the ‘buy now, pay later’ economy, startups are seeking new ways to offer alternative options to borrow.
The data from CB Insights also indicates that Fintech startups raised a record number of “megarounds, where companies raise more than $100 million in investments, as the largest firms in the space raised additional money.” Whilst there were many wins, deal activity remains on a decline. Specifically, VC-backed Fintech deals dived from 452 in Q1 to 397 in Q2. Funding rounds for banking and real estate Fintechs particularly stood out by sliding despite the rise in wealth management and SMBs.
Meanwhile, Asia stands in stark contrast to the upward trends of the quarter with the report stating “Asia saw their capital raise fall from $2.56 billion in the first quarter to $1.52 billion in the second. There were 119 deals done in the region for the quarter, down from 126 in the previous three months.”
With a decrease only reported in the continent of Asia, the findings of this report reflect a mostly positive growth in Fintech funding.
NB: CB Insights specified that its data excluded start-ups solely funded by angel investors, private equity firms, or through other means; such as raising debt or line of credit transactions.
Fintech options in EFTs:
- According to EFT trends the following are some Fintech options in EFTs to pursue:
- Global X FinTech EFT (NasdaqGM: FINX)
- ARK Fintech Innovation ETF (NYSEArca: ARKF)
- Goldman Sachs Motif Finance Reimagined ETF (GFIN)