FinTech Investments in Q3 2020 Drop by 16% Quarter-over-Quarter to $12.15 Billion

The total value of fintech investments worldwide sank to $12.15 billion in Q3 2020, a 16% drop compared to Q2 2020. The amount was raised across a total of 716 deals, with deal volume growing by 26% quarter-over-quarter (QoQ).

According to the research data analyzed and published by Comprar Acciones, the majority of the total deal value in Q3 2020 came from the US which got a total of 340 deals worth $7.85 billion. It gave the region a 64.7% share of the global total for the quarter.

Europe followed at a considerable distance with a total of 216 deals worth a cumulative $2.90 billion. Asia was third with 133 deals valued at $1.35 billion. It is noteworthy too that during Q3 2020, China did not score any major fintech deals. In fact, Q3 was its third consecutive quarter without any major VC deals.

Moreover, based on a CB Insights report, the quarter saw 25 deals worth $100 million+ (mega-rounds), accounting for 60% of total funding value. This was the highest percentage share of mega-rounds since Q2 2018.

For mega-rounds, there was an increase of 64% QoQ to reach $6.4 billion. Non-mega round funding, on the other hand, dipped by 16%.

Early stage startups bounced back into investors’ purview during the period. Angel/seed rounds had a great quarter, managing not only to reverse a three-quarter contraction but also to register a 20% QoQ increase. Seed deals rose from 90 in Q2 2020 to 147 in Q3 2020.

Payment Industry Deals Soar by 41% to $6.22 Billion

As a result of the continued shift to digital transactions, point-of-sale lending providers were among the top performers.

All in all, payment industry deals totaled $6.22 billion in Q3 2020 according to GlobalData, marking a 41.9% increase QoQ. However, compared to the previous four-quarter average of $7.7 billion, there was a 19.2% decline.

The total deal volume shot up by 23.9%, with a total of 135 deals compared to the previous four-quarter average of 109 deals. North America took the lead in the segment with deals worth $2.55 billion.

The top five deals in the segment totaled $3.63 billion, accounting for 58.4% of the total. Top on the list was the FinTech Acquisition III and Paya merger, valued at $1.3 billion. Mitsubishi’s acquisition of Afterpay, valued at $753.06 million was second.

The highest raise in the segment was Klarna Bank’s $650 million. Including its most recent funding round, Klarna has received a total of $2 billion since it was launched in 2005. Following the fundraiser, it was valued at $10.65 billion according to Finextra. It became the first fintech from Europe to have surpassed $10 billion in value-added and the fourth highest valued private one globally.

The Swedish buy now, pay later direct-to-consumer app had over 12 million monthly active users worldwide as at the end of the quarter. Its daily downloads were about 55,000. In a bid to break out of its home market, Klarna has been burning cash. In 2019, it reported a $93 million loss, down from a $10 million profit in 2018. With the new cash injection, Klarna plans to renew its efforts to break into the US market.

In H1 2020, Klarna added 35,000 new retailers and claimed to have become the partner of choice for the top 100 highest grossing US merchants. At the time, there were over 9 million consumers using the app in the US. For the first six months of 2020, its overall transaction volume shot up by 44% year-over-year YoY to $22 billion. Similarly, its revenue grew by 36% YoY to $466 million.

Top 6 InsurTech Deals Account for 69% of Segment Funding

Insurtechs also benefitted from business continuity and health concerns. According to Willis Tower Watson, the sector as a whole raised $2.5 billion globally across 104 deals in Q3. It marked a 63% increase in deal value and a 41% rise in deal count.

Overall, the number of mega-round deals in the segment grew by a massive 50% QoQ. There were six mega-rounds driving 69% of total funding in the segment. These included Bright Health’s $500 million and another $500 million by Ki.

SMB insurer Next Insurance raised $250 million while Waterdrop, a health insurtech raised $230 million. Hippo raised $150 million while Policy Bazaar raised $130 million.

Early stage companies (seed/angel and Series A) in the sector, which had fallen to a record low of 42% in Q2 2020, grew by 57% in Q3. Thanks to this growth, they went back to pre-pandemic levels.