Financial technology startups in most parts of the world raised more money in the second quarter than in the first three months of the year, but business continued to decline, according to a new report from CB Insights.
Fintech funding increased 17% sequentially from $ 7.9 billion to $ 9.3 billion, according to the report. CB Insights said its data excluded startups funded exclusively by angel investors, private equity firms, or by other means such as borrowing or lines of credit.
The Robinhood trading platform, the digital payment processing company Stripe and the Australian company Airwallex announced or completed all financing rounds in the quarter.
One of the trends highlighted in the report is that more and more non-financial companies are integrating financial products into their services. For example, many merchants who previously accepted cash or credit cards are now accepting digital wallets as payment methods.
The coronavirus pandemic, which has so far infected more than 18 million people worldwide, has led to more people shopping online every day, which has spurred the growth of e-commerce. This trend in turn became a "tailwind" for fintech companies, the report added.
Mega-rounds, in which companies invested more than $ 100 million, hit 28 – a new quarterly high – as the largest companies in the area raised additional money. Some of these funds may have been raised to support companies' high cash burn rates due to ongoing economic uncertainty, the report said.
For example, UK digital bank Monzo said recently that its annual losses had more than doubled and warned that its ability to continue operating had become more uncertain due to the pandemic.
Global fintech deal activity reportedly decreased from 452 deals in the first quarter to 397 in the second quarter. This was in line with a trend that started in the fourth quarter of last year before the outbreak of the coronavirus pandemic.
Asia could not recover
While fintech start-ups in North America, South America, Europe, Africa, and Australia have seen a surge in funding in the past three months, capital raising in Asia fell 37% from $ 2.56 billion in the first quarter to 1, The report said $ 62 billion in the second. There were 119 deals in the region in the quarter, compared to 126 in the last three months.
The report also states that a number of fintech companies have either gone public or requested to go public, which could indicate a shift in fundraising trends in the sector. For example, the US online insurance company Lemonade announced its IPO in the second quarter and went public in early July. It made a $ 3 billion market cap on its debut.
But perhaps the most anticipated IPO belongs to one of the best fintech giants in Asia: the Ant Group.
Alibaba's subsidiary announced in July that it plans to list shares on both the Shanghai and Hong Kong stock exchanges. It takes care of the massive digital payment service Alipay. Ant, formerly known as Ant Financial, has a reported value of $ 150 billion.