Rise of FinTech Start-ups in 2021
Investors have kicked off 2021 with big bets on fintech companies, which are seeing broad tailwinds from the adoption of digital payments and an appetite among financial institutions for the latest technology. Two weeks into the New Year, fintech startups have already recorded 10 deals worth $100 million or more, compared with three in the same period last year. Last week alone, more than $1.7 billion in fintech startup funding was announced.
The auspicious start builds off momentum from last year, when VC-backed fintech companies raised $41.7 billion in the second-largest annual total of the past decade.
Mega-rounds for consumer finance companies have followed the widespread adoption of digital payments amid a spike in ecommerce during the pandemic. Last week saw $300 million rounds raised by global payments operator Rapyd and the financial services unit of Indonesian ridehailing and food delivery company Grab.
But as consumer fintech has grown increasingly crowded, newer startups are targeting B2B and enterprise applications. Take London-based online payments platform provider Checkout.com, which processes transactions for companies like Grab, Klarna and Farfetch. Last week Checkout nearly tripled its valuation to $15 billion and became Europe's most valuable VC-backed startup after landing a $450 million investment.
2020 marked a year in which a couple of innovation agendas accelerated. As fintech companies pulled in fresh capital, financial institutions were in turn able to adopt new technologies to help them modernize their offerings.
With the latest spate of mega-rounds, investors are paying years ahead for what they believe these businesses can become. Even so, there's a risk that exuberant funding rounds could lead to excessive spending by startups.
In India, key industry players such as Zerodha, Paytm, PhonePe, and Groww, among others, witnessed growth in activity and users as people turned to digital solutions for investing, banking, and contactless payments. For investors, the returns these startups have generated and the problems they’re trying to solve have helped create a bullish thesis. From identifying and catering to new target groups to micro startups that specialise in distinct financial services, opportunities in the fintech startup space in India are aplenty.
Whether it’s creating a common language between institutional banks and small businesses so they can access financial services, or facilitating quick sachet loan disbursals at moderate interest rates, fintechs today are powering various pieces of important machinery: the Indian economy.