After several weak quarters, we are seeing an increase in funding for digital banking start-ups.
Over the past three months, investors have poured nearly $1.2 billion into a geographically dispersed group of online banking providers, Crunchbase data shows. The three largest recipients of financing – One, Tymek AND Current — announced recent rounds last week.
The biggest catch went to One, a Sacramento, California-based startup that gives online banking, debit cards and installment loans for purchases in Walmartits majority shareholder. Walmart and fintech investor Ribbit Capital led a $300 million round at a reported valuation of $2.5 billion.
Tyme, which offers digital banking in South Africa and the Philippines, has advanced to its next largest round: a $250 million Series D. Nubank led the financing that places a $1.5 billion valuation on the five-year-old Singapore-based company.
Current, living in New York, announced last week it held its latest fundraising: a $200 million financing that brings its investments so far to over $600 million. The company says its revenue is up greater than 90% this yr and that it is aiming for profitability in 2025.
These three weren’t the only big fundraisers. Using Crunchbase dataWe have prepared a list of seven digital banking startups that have revealed large recent sources of financing in the last 4 months.
Time to go out
The funding frenzy comes in anticipation of fintech’s return to an initial public offering in 2025, with several high-profile firms preparing offers.
One of the most famous firms is based in San Francisco Chimea pioneering challenger bank founded in 2012 that has raised $2.3 billion in high-profile equity financing so far. The company apparently submitted confidentially for IPO, z Morgan Stanley chosen to steer the sacrifice.
An early entrant in the digital banking space, Chime bills itself as a “wallet-friendly” alternative to traditional banks, with no overdraft fees or minimum balance requirements. Today, apparently, there are approx 7 million users and earns money mainly from interchange fees paid by merchants for card purchases.
Another impressive fintech debut expected in 2025 is the Swedish “buy now, pay later” platform. Klarnawhich last month revealed it had filed confidentially for a U.S. initial public offering. If successful, Klarna’s IPO could significantly contribute to reviving public investor appetite for recent fintech offerings.
There are also other big names among potential IPO candidates, including: Stripea perennial favorite that has remained private until now. Meanwhile, among neobanks, a UK-based banking app Revolut is reportedly considering an offer from the United States. Additionally, a digital bank based in Berlin N26 Lately revealed their first quarterly earnings and revenue estimates, the variety of move startups make when they are on the IPO path.
Public markets appear to be favoring fintechs these days
Public markets also seem more open to fintech newcomers these days. In particular, some of the most high-profile firms that went public in 2020-2021 during the IPO and SPAC boom and saw their shares soar in the subsequent correction have since recovered nicely.
Installment lender ConfirmThe company’s stock has increased several times since last yr, and the company was recently valued at around $20 billion by market capitalization. Shares of a consumer lender and financial services provider SoFi has shown similar growth, and the company was recently valued at around $17 billion.
Coinbase AND Robinhood they have also surged in recent months, fueled by investor enthusiasm around cryptocurrencies.
For the neobank space, Bellwether Nubankwhich trades under the name Nu Holdings, hit an all-time high in October. Since then, the company’s stock has declined somewhat, but the company still commands a sizeable market capitalization of around $55 billion.
About time
The cycles are turning, and for fintechs and challenger banks, it looks like we’re entering a more bullish phase.
Of course, this is not a given. Market sale this week after Federal ReserveFor example, warning statements about future rate of interest cuts have caused fintechs to wipe out some of their recent gains. We also have not seen fintech unicorns enter U.S. public markets in recent quarters, so it’s unclear how receptive they shall be.
Still, considering that just a few years ago fintech was the reigning leader in startup financing, it doesn’t seem unreasonable that those that survived the crisis could enjoy higher times.