Sticky Situation
“Sticky Situation” – a cartoon that illustrates how the FinTech market is still struggling after engorging in capital in the early 2020s.
In 2021, worldwide fintech funding hit a record of $239 billion, according to KPMG. Companies like Block, Affirm, Klarna, and Revolut achieved multibillion-dollar valuations.
However, by mid-2024, investment levels dropped significantly, with FinTechs worldwide raising only $52 billion.
There are some bright spots, such as Revolut’s recent secondary share sale that increased its valuation to $45 billion (36% increase on the last valuation in 2021), Ramp’s $150 million Series D, and Altruist’s $169 million Series E.
According to Boston Consulting Group and QED Investors’ latest global FinTech report, there is more “redesigning” to come as they noted that “many FinTechs have yet to apply [cost reduction practices] comprehensively.”
In reflection, Fintech M&A, driven by this difficult funding and IPO landscape, is outpacing last year’s activity.
In 2023, the total value of fintech M&A deals reached $59 billion—by mid-2024, that figure has already hit $33 billion.
There are also still some regulatory headwinds around banking rail partnerships that need to be worked out coming on the back of the collapse of Synapse and Railsr. But, the FinTech market is little different than most others private markets, the pandemic credit boom and the lack of exits has gummed up the system.
As Tom Callahan, Nasdaq Private Market CEO, remarked “For private companies, there’s a conveyor belt, and that conveyor belt is kind of broken right now… And while things have improved from 2023, it’s still incredibly challenging. It’s a bit like a game of musical chairs—there are too many private companies, and too little capital out there for all of them.”
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Sources:
Frankie DiAntonio, (Apr 26, 2024) – As Fintech Expands, Opportunities And Challenges Lie Ahead – Forbes
Cameron Emanuel-Burns (Aug 13, 2024) – US fintech Tally to shut down after failing to secure “necessary funding” to continue operations – Fintech Futures
