Fintech Key Trends 2014

Top 50 Investments


“We have a chance to rebuild the system. Financial transactions are just numbers; it’s just information. You shouldn’t need 100,000 people and prime Manhattan real estate and giant data centers full of mainframe computers from the 1970s to give you the ability to do an online payment.”

As Marc Andresseen argues, in next years it is going to be possible — besides desiderable — to “Rebuild the system”, thanks to Fintech sector innovations. Actually, the investments and the enthusiasm around Fintech startups speak clearly.

Global investment in financial technology has more than tripled during the last five years. With innovation enabled by new consumer behaviors, technology and regulations, 2014 saw private FinTech companies raise nearly $3 billion — more than tripling the $930M invested globally in FinTech in 2008.

Global Fintech Financing Activity (2008–2013). Source: Accenture and CB Insight

StrategyEye data shows approximately USD2.8B invested across 216 deals to date and there will still be more investments before the year is out. It’s this level of investment that has partly helped see 2014 dubbed as a “watershed year” for fintech.

Global VC Investment in Fintech Companies in 2014 Source: StrategyEye Deal Data

2014 Key Trends

Brand Venture Capital investment on the rise

There were four investments of more than $100M — in credit marketplace Credit Karma, mobile payments pioneer Square, online payments firm Stripe and Chinese peer-to-peer lender Renrendai. Drilling down into the types of areas being funding, there is still plenty of investor appetite for startups addressing payments, lending services, money transfers and crypto currencies.

Payments (including bitcoin startups) accounted for around a third of all investment in fintech. Bitcoin helped power payments investment as investors continue to grow more bullish with their bets on crypto currencies. Some $287M was invested across 36 deals. There were notable $30M-plus rounds in the likes of Blockchain and Bitpay and there were 12 deals of $10M or more. These bitcoin investments are mainly in the US, but bitcoin startups based in China, South Korea and Argentina all also received investment.

Top 10 Investments in Fintech in 2014. Source: StrategyEye

Of the $2.8B of venture capital investment in fintech, the US accounted for approximately two thirds of it with $1.8B across 122 deals. But although still in the US’s shadow the European fintech scene saw a dramatic increase in fintech funding during 2014, with $569M invested across 46 deals in the region. The UK is the key investment territory in Europe with UK fintech companies raising a combined $345M so far this year across 22 separate rounds. That figure is equivalent to 60% of all European fintech funding and the region’s two largest deals — e-commerce payment service Powa’s $80M haul and Funding Circle’s $65M round — both went to companies based in London. Other key countries in Europe are Germany and Sweden. In the Asian market $330M was invested in 34 deals with India and China the most active regions, seeing nine and eight rounds each this year.

Conducive Climate for innovation

There is a growing understanding among the established order — as Banks — that they need to partner with, learn from and probably acquire disruptive startups to avoid losing out on future opportunities or at worst finding areas of their business redundant.

Regulatory challenges

As stated in StrategyEye Insight Report 2014, “although changing consumer and company perceptions about what technology can do for their finances remains the biggest single challenge in this space, the regulatory environment and attitudes represent a barrier many fintech startups are struggling with. The appetite for change may be global, but not every territory is as relaxed as each other.” The UK, for example, is keen to take advantage of this by being progressive in terms of regulation.

Top 50 investments in Fintech in 2014 divided by sector. Source: StrategyEye

Update

This week’s $250 million funding round for Netherlands-based Adyen gave a further boost to what was already a big year globally for payment-processing investments. The round has been announced just a few days after this blog post and after the release date of StrategyEye report. Adyen took over the top spot on the list of biggest payment-tech rounds of the year, it’s the only non-U.S. company on the list.

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