Global funding for private financial services firms — the leading sector for investment — has declined significantly over the past five quarters.
Financial services firms raised $9.7 billion in Q2 2024, a slight year-over-year increase and a 17% quarter-over-quarter increase in comparison with the $8.3 billion invested in the sector in the same quarter of 2023.
However, funding in the last quarter was down 75% in comparison with the market peak in the second quarter of 2021, when greater than $40 billion was invested.
For the past five quarters, funding for financial services firms has remained below $10 billion in each quarter, in keeping with an evaluation of Crunchbase data. Those five quarters represent the lowest funding amounts for the sector since Q1 2017, when $9.3 billion in funding was reported.
While every sector saw funding decline in comparison with 2021, financial services showed a larger decline since the slowdown. By comparison, overall global funding in the last quarter was down 59% from the peak quarter in 2021.
Investor Perspectives
We met with Nigel Morris With QED Investorsa company with a portfolio of fintech corporations that went public in 2021, including Remitly, SoFi, Nubank AND Flywire.
Morris admits it has been hard to be optimistic over the past three years as corporations have failed to satisfy revenue targets and have focused on cutting costs to get back on track.
But after getting through the austerity period, there are six to eight fintech corporations that have the potential to go public if they decide to, he said. Morris also predicts a more lively mergers and acquisitions market, with leading fintech corporations trying to expand their products or geographic reach, and corporations merging to develop into greater players.
Waiting for something, built-in financial services This is an area with great potential, which is already visible in the “buy now, pay later” lending model, Morris said.
(*5*) he said.
Fintech unicorns
Financial services is the leading sector for unicorns, based on Crunchbase data evaluation, with over 390 corporations on The Crunchbase Unicorn Board. These include: Group of Ants from China and also a payment company Stripeand neobanks Revolut AND ChimeThe last three fintech corporations could go public next yr.
Despite the funding slowdown, there are many fintech corporations that missed the moment of going public in 2021 and have spent the last two years restructuring their businesses.
Stripe claims that $1 trillion in payments processed in 2023 and Revolut revenues in 2023 increased by 95% yr over yr to $2.2 billionwith an increase of 12 million recent customers.
“The truth is that banks are struggling to keep their customers happy,” Morris said. “They have outdated technology, they don’t have the drive that many fintech companies have. It’s a really interesting David-versus-Goliath battle, and we’re just at the beginning of it.”
Methodology
The data in this report comes directly from Crunchbase and is based on reported data. Reported data is as of July 21, 2024.
It is vital to keep in mind that data lags are most noticeable in the earliest stages of a enterprise’s life, and seed funding amounts increase significantly after the end of the quarter/yr.
Financial services is a broad industry group that features banking, insurance, lending, payments, virtual currencies and wealth management.
Crunchbase industries are not exclusive. An organization may be in greater than one industry and greater than one industry group.
Please note that every one funding values are reported in US dollars unless otherwise noted. Crunchbase converts foreign currency to US dollars at the prevailing spot rate from the date that funding rounds, acquisitions, IPOs, and other financing events are reported. Even if these events are added to Crunchbase well after the event is announced, foreign currency transactions are converted at the historical spot price.