Fintech Annual Review and Trends Report
Summary of findings
2020 funding and deal activity declined slightly. Funding and deal activity fell 2% and 13% year-over-year (YoY), respectively. Deals in every fintech vertical we track fell except for SMB, which grew 13% YoY. Startups addressing payroll operations — such as Remote, PagarBook, and Gig Wage — saw significant traction this year.
Q4’20 saw 522 deals, reversing a 4-quarter decline. Deal activity increased 11% quarter-over-quarter (QoQ) in Q4’20, the first quarter of deal growth since Q3’19. Series A, B, and C rounds accounted for 90% of the increase in deals. Higher early- and mid-stage deal activity helps explain why mega-rounds’ ($100M+ deals) share of total funding fell from 59% to 44% in the quarter.
Fintech is gaining momentum in South America. From 2016 through 2020, funding to South America-based fintech companies grew at a 64% CAGR. Around 40% of deals during this period went to alternative lending and payments companies. Access to credit and the ability for consumers and businesses to send and receive money are significant pain points in the region; startups such as Creditas and dLocal raised funding in 2020 to help solve them.
M&A activity grew 25% YoY in 2020. 2020 was a busy year for fintech M&A, with companies spanning our coverage areas becoming acquisition targets. For example, Visa and Stripe both made acquisitions in emerging markets, acquiring YellowPepper and Paystack, respectively. We also saw incumbent financial market data providers Bloomberg and FactSet buy businesses to supplement their offerings (Second Measure and Truvalue Labs, respectively).
Sector investment trends in 2020
Payments: Payments companies raised over $12B in 2020, a YoY increase of 3%. Deal activity in the same period declined 7% to 337. Notably, there were 37 mega-rounds in 2020, up from 30 in 2019.
Banking: While funding to digital banking companies increased 12% YoY, deals were flat. Q4’20 was also the fourth consecutive quarter of funding growth, up 5% vs. Q3’20. Alternative lending:
Alt lending investment activity was down significantly in 2020, with both funding and deal activity declining 35%. Mega-rounds also declined from 25 in 2019 to 15 in 2020.
Wealth management: Deals to wealth management companies fell 11% during the year. However, funding increased 86% thanks to 10 mega-rounds, which accounted for 50% of total funding in 2020.
Insurance: Insurtech deal activity was flat for the year, but funding fell 6%. However, 2020 saw multiple public market exits, including Lemonade, Root Insurance, and Metromile.
Capital markets: Funding grew 21% YoY, but deal activity declined by 13% as larger rounds took share. Mega-rounds alone accounted for 60% of total funding in 2020. Additionally, the number of megarounds more than doubled from 13 in 2019 to 27 in 2020.
SMB: SMB funding and deal activity increased 18% and 13% YoY, respectively. Q2’20 was by far the biggest contributor to funding and deal growth, representing 41% and 29%, respectively.
Real estate: Funding to real estate companies plummeted 43% YoY, while deal activity declined by 23%. Quarterly deal activity has not grown since Q3’19.
CBInsights complete 2020 Fintech Trends Report can be retrieved here: