2021 Fintech Funding Lookback

Financial technology, or fintech, is a big buzzword in the business world right now. But what does it actually mean? In short, fintech is the use of technology to improve financial services. This can include anything from online banking and investing to mobile payments and money transfers. As society moves more and more towards a digital lifestyle, it’s no surprise that fintech is on the rise.

According to the CB Insights 2021 State of Venture Report, the global venture funding for fintechs topped $621 billion in 2021, compared to $294 billion in 2020. This meteoric rise in investments in fintech shows that the fintech revolution is just gearing up.

Figure 1 : Source | Tech Crunch

Figure 1 above shows how funding in fintech saw an exponential rise in 2021. It is important to note that it is not just the funding that has increased but also the number of deals.

The rise in the number of deals shows that more fintech startups received funding in 2021 than ever.

This shows that the fintech ecosystem is growing rapidly. At this pace it’s hard to keep up with all the latest trends in fintech. Between cryptocurrencies, mobile payments, and data analytics, there are always new developments to follow.

But what are the most important trends right now? Here’s a look at some of the hottest topics in fintech right now. So what are the top trends in fintech right now? And how can investors capitalise on them? Read on to find out!

Where is the money going?

$621 billion is a big number. At first glance it appears overwhelming and it is. But where is this money going?

According to the CB Insights 2021 State of Venture Report, the following five regions (sorted top-down) attracted most of the fintech related investment in 2021.

• Asia
• USA
• Europe
• Latin America
• Canada

Asia

36% of total funding in 2021, went to fintech startups in Asia. Over 12000 deals were closed in Asia, which overtook the USA deal count for the first time in 7 years. If we look deeper into this, more than half of the deals in Asia closed in China alone.

This establishes China as a dominant fintech force to be reckoned with.  Some of the biggest fintech names in China are Alibaba, JD Finance, and Tencent. These companies have established themselves as dominant forces in mobile payments, lending, insurance, and investments.

The following sub industries bagged the biggest share of fintech related investment in Asia.

• Accounting and finance
• Outsourcing
• Online payments

USA

In the US, Silicon valley is still very much the tech capital. Silicon Valley raised $105 billion in 2021 compared to $52 billion in 2020. New York bagged the second largest funding for fintechs at $55 billion, followed by Boston at $32 billion. It is interesting to note that Boston has a thriving biotech ecosystem.  This is due to the presence of world-class universities in its vicinity.

These universities attract huge amounts of venture funding to the city. This suggests that startups in Silicon valley might need to look for new funders in other cities with established startup ecosystems, like Boston.

Some of the biggest fintech startups by valuation in the USA are Stripe, Klarna, Kraken and Robinhood. These companies have disrupted traditional industries with their innovative technology. They have shown that there is a lot of potential in fintech and they are only getting started.

The following sub industries bagged the biggest share of fintech related investment in the USA.

• Asset management
• Consumer lending
• Insurance
• Outsourcing

Europe

Europe is close behind the USA in attracting investment. In 2021 Europe received $93.3 billion investment compared to only $38 billion in 2020, registering 142% rise.

Some of the biggest fintech firms in Europe are Klarna, Adyen, Transferwise, Funding Circle, and Avaloq. These firms have redefined traditional industries by developing cutting-edge innovation. They’ve shown that fintech has a lot of promise and is only just getting started.

The following sub industries bagged the biggest share of fintech related investment in Europe.

• Food and grocery
• Accounting and finance
• Retail
• Online marketplace

Latin America

Latin America is far behind the top three regions in terms of investment. In 2021 Latin America secured almost $20 billion compared to $5.4 billion in 2020.

Some of the biggest fintech companies in Latin America are Uala, Creditas, Ebanx, Nubank, Addi, Belvo and Bitso. These companies have disrupted traditional industries with their innovative technology.

The following sub industries bagged the biggest share of fintech related investment in Latin America.

• Asset management
• E commerce
• Online market place
• Supply chain
• Accounting and finance
• Online payments

Canada

Canada is at the end of our list with a total $11.6 billion of funding in 2021. Compared to Asia and the USA this may sound like peanuts but from the Canadian perspective, this is equal to 269% increase in investment from 2020.

Some of the biggest fintech companies in Canada are Koho financial, Borrowell, Wave and Freshbooks. These companies offer a variety of financial products and services, including online banking, investing, and mortgages. They are all expanding rapidly and are expected to grow even more in the coming years.

The following sub industries bagged the biggest share of fintech related investment in Canada.

• IT solutions and software development
• Ecommerce
• Asset management
• Accounting and finance
• Business intelligence
• Online marketplace

The five regions mentioned above are seeing rapid development and innovation in fintech. One of the biggest trends in each of this region has been an increase in fintech related mergers and acquisitions. Established corporations are increasingly buying out fintech startups, to merge with fintech in order to create synergy and remain on top of their game.

Conclusion

Fintech is a broad term that includes financial services and technology. It’s popular because it can bring greater efficiency to banking, which means lower costs for consumers and clients as well as higher profitability for the company. Countries like the USA, China, Canada, South Korea, Sweden and Singapore are centres of fintech investment.

If you are an investor, then companies in these five regions should be at the top of your list.