After a year in lockdown where consumers and investors saw Zoom stock zooming, investors are flush with cash (or stock) at the ready. Whether housing, used cars, or timber, demand is driving activity to record levels. Fintech is no different. Q1 2021 was the largest funding quarter on record, according to CB Insights, with fintechs raising $22.8 billion across 614 deals.
As fintech startups, challengers, and even mature fintech providers laser in on evermore specific pain points, investors pour funds into the payments, lending, data, and other approaches to pain relief. Here are some of the recent deals that have caught my eye.
So What? Banks are becoming fintechs, fintechs are becoming banks, and all parties are increasingly looking for inspiration with specific use cases spawned from specific niches or target markets. Meanwhile, a rising number of players (including global firms like VISA) are looking to be connectors in the middle of it all.
So What? Fintechs that offer early access to funds, better spend control, specific niches and crypto have been top of mind for investors in 2021. Financial institutions are learning what consumers have known all along: status quo payments are not quite good enough. And, they are investing rapidly to address the pain felt by employers, employees, and communities.
So What? Converting digital engagement into revenue through data, POS and origination solutions continues its hot streak with no end in sight.
So What? Whether it’s buy-now-pay-later or just getting digital lending done, look for midsize banks to learn from the experiences of 2021 to digitalize their services and reduce turnaround time through third party vendors that can add capabilities – especially capabilities that grow loans, not just process them. While we hear from banks looking to partner in fintech, we hear from more that want to learn from and copy how fintech challengers drive loan leads.
Traditional financial institutions have seen fintech challengers catch up to their position in many ways. Midsize banks and credit unions are racing to catch up with upstarts, acquisitions, or new value propositions supported by more established fintech providers. As financial institutions continue to spend to close this gap, watch for more deals related to third party digitalization and niche banking. With demand hot and new supplier deals growing by the day, the fintech market is a steady burn ahead as far as I can see. Tell me I’m wrong. What do you think could pour cool water on this hot market?
Any other fintech deals you’ve been watching that I missed here? Email me.
Shout out to Connor McAndrew for his contributions to this article.