Fintech Investments Focused on Retail Vertical Increased 78.6% Compared to 2019: Report

Venture capitalists invested “a record $41.0 billion into the retail fintech vertical in 2021,
representing a 78.6% increase compared with 2019’s $23.0 billion,” according to an update from Pitchbook.

VC investments into the banking and credit and wealthtech segments “drove this increase.”

As of Q3 2022, VC deal value “hit $16.2 billion, representing a 47.6% YoY decline.” Notably, VC deal value within the credit and banking segment “fell by 48.4% YoY to $6.5 billion at the end of Q3.”

On a QoQ basis, VC deal value “fell by 39.8% in Q3 2022, the largest QoQ decline seen so far this year.”

Notable fintech deals include:

  • Gojek, an Indonesia-based super app, which raised $1.3 billion in a late-stage deal ahead of itsIPO, initially projected to value the company at $28.0 billion
  • Trade Republic, a retail trading platform, which raised a $1.2 billion Series C at a $5.3 billion postmoney valuation
  • N26, a Germany-based neobank, which raised a $900.0 million Series C at a $9.0 billion postmoney valuation.
  • Better, an online mortgage lender, which raised a $750.0 million Series F at a $6.9 billion postmoney valuation
  • Klarna, a BNPL platform, which raised an $800.0 million late-stage round at a $6.7 billion postmoney valuation

The credit and banking segment reportedly includes companies that “offer credit and banking services to consumers.”

As noted in the update from Pitchbook, these products and services “can be tailored to the needs of individual consumers and include checking and savings accounts, debit cards, credit cards, lines of credit, and other POS credit products such as BNPL.”

The report from Pitchbook added:

“We include startups that develop new consumer credit products and services, such as BNPL, in this segment as we believe they have the potential to disrupt traditional credit card models, thus affecting incumbent banks. Companies in this segment often differentiate themselves by focusing on distinct customer demographics and by providing personalized offerings.”

In recent years, credit and banking companies have “garnered a substantial amount of
attention from investors, as these firms are notably reshaping how consumers spend and interact with their banks.”  In addition, these companies typically “cater to a wider range of individuals than incumbents do, thus enabling greater financial inclusion among consumers.”

The report from Pitchbook also mentioned:

“Over the last several years, neobanks, also referred to as digital banks or challenger banks, have become increasingly popular among consumers. Based on our estimates, neobanks have over 200 million customers around the world. Unlike incumbent retail banks, neobanks do not operate physical branches and thus offer banking services through websites or apps. Often, this results in financial services that are more convenient, faster, and more accessible than those provided by traditional banks.”

Additionally, the lack of physical locations “allows for lower operating costs, which
are in turn passed on to consumers.”

The report pointed out that the concept of BNPL has also recently “gained popularity,
with companies such as Klarna, Afterpay, and Affirm enabling consumers to pay for products in installments and often without being subject to credit card or interest fees.”

This model is “a viable alternative to credit cards and has become increasingly prevalent with the growth of e-commerce.”

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