Fintech funding rebounds in Q2 after COVID-19 disruption

Data compiled by Buy Shares indicates that turbulence in the fintech sector may be dissipating as market leaders managed to raise USD$3.81bn in Q2.

With some estimates (see CBInsights) placing 2020’s Q1 as the worst since 2016 and regional investment in fintech dropping in significant amounts - a 69% fall in Asia - the start of the year did hold much promise for significant growth.

The economic uncertainty and reconfiguration spurred on by the COVID-19 pandemic is almost incontestably the primary reason. However, the same data could suggest that new customer trends and operational paradigms will ultimately rescue fintech from its doldrums. 

Fintech in the new normal

For instance, digital payment companies have experienced enduring popularity and investment despite the disruption. This could be a direct result of government guidelines which discouraged the exchanging of physical cash in favour of contactless alternatives.

This is seemingly borne out by Q2’s big winner Stripe, an online payment processing company, which managed to raise $850mn - almost double the amount raised by Robinhood in second-place with $430mn.

Another indicator of payment companies’ success is market cap: PayPal managed to almost double between Q1 and Q2 from $112.3bn to an additional $92.3bn in the latter. Adyen accomplished a similar feat (Q1 $25.5bn + Q2 $18.6bn), as did Square to an even greater degree (Q1 $22.8bn + Q2 $23.3bn).

Other companies which managed to break the $200mn funding mark include:

• Varo ($241mn)
• Oscar ($225mn)
• Carta ($210mn)
• Fundbox ($200mn)

The presence of health insurance entities (Oscar) and relief funds for SMEs (Fundbox) provides further evidence for how COVID-19 has shaped the market and what is being given economic priority.

Once again, market cap demonstrates that payment companies weren’t the only ones to see positive returns during the pandemic: e-commerce platform Shopify managed to increase from $48.8bn in Q1 to $64.5bn in Q2 - a 32% rise over a similar period. 

Buy Shares concludes its report by stating, “Despite the pandemic, the funding rounds for the second quarter are high with a focus on B2B products and services that enable B2C fintech start-ups and traditional financial services companies to operate securely.”