The trend of global funding to venture-backed fintech companies growing in the later stages but with a pullback in the seed-stage indicates a general consolidation towards the maturing of fintech sector, where the startups are looking to scale up beyond their boundaries, says GlobalData, a leading data analytics company.
Sudheshna Karukula, Fintech Analyst at GlobalData, comments: “The change in the venture capital (VC) funding equation over the last few years has encouraged the most successful fintech startups to gradually re-bundle their offerings in existing as well as new geographies, across the financial services value chain, by leveraging emerging technologies.”
An analysis of GlobalData’s Disruptor Intelligence Center reveals how various fintech companies are trying to expand as the fintech sector is stabilizing and maturing.
India-based One97 Communications, the parent company of Paytm, became the first fintech unicorn in India after securing US$1.6bn in 2019. The fintech with a total funding of US$16bn started its journey as an online mobile recharge and bills payment platform, and gradually scaled up into other digital financial services businesses such as banking and insurance. It intends to use the latest funding to merchant expansion in both online and offline modes as well as make an aggressive push into the digital banking and insurance businesses.
San Francisco-based startup Robinhood raised US$323m in Series E funding round in 2019, bringing its total funding to US$7.6bn. The fintech, which is a popular commission-free stock broker in the US, recently received regulatory approval to expand its services into the UK. It recently launched a cash management service by helping users to earn interest on un-invested money in their account and spend it via Robinhood-branded debit card account.
NY-based insurance startup Lemonade raised US$300m in a Series D funding in 2019, shooting up its total funding to US$2bn. After disrupting the US insurance market using artificial intelligence and behavioral economics by successfully targeting millennials with renters, homeowners and condo insurance, the insurtech aims to expand its presence across Europe. Moreover, the startup is eyeing to foray into the largely untapped pet insurance market.
Sudheshna concludes: “The fintech companies kick-started by unbundling banking services, which threatened the market share of traditional banks. However, now the trend has changed evident from the fintech startups re-bundling their services as well as expanding into new geographies. Such trends are expected to continue in 2020 and beyond given the uncompetitive traditional banks in providing more unified platforms.”