The Fintech ecosystem stands at a key moment as 2024 comes to an end, according to an update entitled, The 2024 Recovery Signals a New Era For Fintechs (authored by Abdul Abdirahman, David Jegen, and Minesh Patel).
After reaching a low market valuation point in 2022, the fintech ecosystem appears to have demonstrated a fair amount of resilience, with many public and private fintechs attaining considerable scale.
As noted in the research report, fintechs seem to have now evolved from so-called “growth-at-all-costs” to sustainable business models, and with the IPO window reopening after a two-year struggle, there could be a lot to look forward to this year.
The F-Prime Fintech Index should end 2024 up around 40% and notably outperforming the Nasdaq and S&P 500, up a significant 33% and 25%, respectively.
The report’s authors also mentioned that during the past 10 years, the F-Prime Fintech Index is up 918%, outperforming the S&P 500 by 730 percentage points.
And firms in the F-Prime Fintech Index have added $185 billion in 2024 to close the year at around $760B.
They have also added about $20B in total revenue to end Q3 at $170B. Public fintech startups have also recovered more than before. In fact, the report noted that they are becoming key players in their respective categories.
At present, the majority of the firms in the Fintech Index are said to be profitable, generating around $14B in combined profits.
Back in the year 2021, the average revenue growth stood at 68% (vs. 17 percent now); however, they were actually burning 21% of revenue on average.
Just like the larger stock market, fintech firms benefitted from interest rate cuts, and saw a considerable surge after the election results.
But, the report’s authors pointed out that the recovery has been consistent with each quarterly report “highlighting strengthening fundamentals and sustainable business models.”
The update explains that the market’s increasing sophistication is “evident in how it rewards different business models.”
Shopify’s 48 percent surge in 2024 “lifted its market capitalization to $132B, reflecting not only recovery, but also the power of embedded financial services at scale.”
Shop Pay adoption exceeds “40 percent and payment volume is up 37 percent year-over-year.”
Coinbase’s 78 percent rise to $66B “demonstrates the growing institutional adoption of digital assets, even amid regulatory uncertainty. Trading volume is up 165 percent year-over-year, with over 8,000 institutions leveraging Coinbase’s prime brokerage services.”
Institutional revenue doubled to “10 percent of revenue over the past couple of years.”
The SEC’s approval of spot Bitcoin ETFs has only “accelerated this institutional embrace and the incoming administration’s stance on crypto has led to a 40 percent surge in the price of Bitcoin since the election (crossing $100,000 price for the first time).”
The report also noted that Nubank may illustrate the “most impressive story of category leadership.”
Nubank’s valuation increased “28 percent to $47B, backed by record quarterly revenue in Q3 of $2.9B.”
Monthly active users have “reached 110 million, of which 92 million are in Brazil, equaling 42 percent of the population.”
Nubank has shown that digital-first financial services “can scale rapidly while maintaining quality — default rates are 30 percent below the Brazilian banking average.”
The report concluded:
“As with the broader market, fintechs will benefit from lower inflation, falling interest rates, and any deregulation by the incoming administration. We expect this will lead to more exits, M&A, and growth in 2025… There are already 27+ public fintech companies with $1B+ in revenue.”
