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Fintech investors continue to focus on mature companies and sectors in 2018


In 2018, the fintech industry saw trends of continued funding for older venture capital (VC)-backed startups and a focus on global diversity.

February 27, 2019

A blog post by Jim Eckenrode, managing director, Deloitte Center for Financial Services, and Gaurav Vajratkar, Senior Analyst, Deloitte Support Services India Pvt. Ltd

Global fintech landscape

We’ve been tracking the global fintech landscape for over a year now, beginning with our Fintech by the numbers report. We have continued updating our tracking numbers since that first edition, so we thought we’d provide our readers with an update as of year-end 2018.

Our recent analysis and research show that fintech startups received over $60 billion in funding in 2018 (see Figure 1). This continues a multi-year trend: Financial services technology companies saw over $38 billion of investment in 2017, and $27 billion in 2016. Furthermore, at year end our data show that there are 22 fintech “unicorns” globally, with a total valuation of over $71 billion.

Turning to fintech product and solution categories, the oldest and most well-established categories continued to perform well. The five most-active areas accounted for 89 percent of funding in 2018 and revolved around the following:

  • Payments at $18.36 billion, which was 30 percent of the total
  • Deposits and lending at $14.06 billion, or 23 percent 
  • Leasing and purchase-sale transactions at $12.81 billion, or 21 percent
  • Property development and management at $4.42 billion, or 7 percent
  • Financial management at $4.00 billion, or 7 percent

Since 2008, North America produced most of the fintech funding activity, with Europe and Asia trailing behind. But this is starting to change. Global fintech funding saw a significant uptick of deals in Asia and North America, especially in the second quarter of 2018. Overall, Asia surpassed North America in fintech funding by 24 percent in 2018, owing to a handful of large funding rounds in China. Conversely, European funding activity was at a five-quarter low in the second quarter of 2018 but surged back in the third quarter.

We also see geographic diversity in the fintech movement when it comes to company headquarter locations. As we learned in our research on incumbent/fintech collaboration, financial institution leaders know that fintech is increasingly going global. As one executive put it, “We don’t want to be constrained by focusing only on the US. You can usually find five to seven companies globally doing the same things; that was not the case (before).” While the San Francisco Bay Area, New York, and London lead the way for fintech headquarters, Singapore, Toronto, Chicago, Austin, Berlin, Los Angeles, Boston, and Mumbai are also developing locations for new fintech formations.

The sweet spot for fintech investing

As the market evolves, fintechs that are unable to evolve their solutions or meet revenue expectations will continue to find it difficult to attract investors or partners. Indeed, investors seem less interested in committing capital to more recently-founded companies. Part of that is a scale problem: Our data shows that only 11 new VC-backed fintechs were founded in 2018 (see Figure 2), compared to 178 launched in 2017.

But that’s not all. Our analysis further shows that investors in 2018 continued to allocate capital to companies founded in the boom years of 2011 to 2014. Looking at the $60 billion invested in 2018, more than half was allocated to companies founded during that timeframe, versus only 13 percent for companies founded since then. This is not a new trend. In fact, over each of the last five years companies founded in the years 2011 to 2014 have received the lion’s share of investment. (see Table 1).

Clearly, the fintech market continues to evolve, and we will continue to follow these developments over time. Be on the lookout for our Banking & Capital Markets and Investment Management specific fintech research in the coming months. We would love to hear about your experiences investing, partnering, and building fintech solutions. In the meantime, view Deloitte’s interactive tool to gain an in-depth view of the fintech market and access our fintech article collection to read more on this topic.

What do you think?

Will the continuous and high investment in fintech burst? Will there be a sudden spike in new startups being formed?

Join the conversation on Twitter: @DeloitteFinSvcs.

QuickLook is a weekly blog from the Deloitte Center for Financial Services about technology, innovation, growth, regulation, and other challenges facing the industry. The views expressed in this blog are those of the blogger and not official statements by Deloitte or any of its affiliates or member firms.

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