FinTech Report

Q2 Global FinTech Report Hypes LATAM

Q2 Global FinTech Report Hypes LATAM

CB Insights released its 2019 Q2 Global FinTech Report.  The market intelligence company focuses on analyzing on millions of financial data points, including from venture capital firms and startups.  The report covers general financing, sector, and regional trends.  This quarter’s report highlights the future of South America, the newest FinTech unicorns, and the race for the underbanked.

Latin America is on Fire

This quarter marks the lowest in the past five quarters for North America, Asia, and Africa. Even though North America was able to foster three new unicorns, the continent still saw a 21% drop in deals.  Australia dropped for its second quarter in a row after a rally in 2018 Q4.

LATAM has seen the most erratic movement over the last five quarters. After a considerable drop in 2018 Q4, the area saw a rebound in 2019 Q1 and experienced the smallest decline in 2019 Q2.  Despite the volatile performance, Latin America is still at the top of funding for the quarter, outgrowing all other regions. LATAM secured 23 deals totaling $481 million this quarter and started off Q3 with an industry record $400m round with NuBank, a Brazil online bank.

Experts believe this growth will continue to trend upward as the countries in South America experience more prolonged periods of stability.  Even NASDAQ agrees, calling out Argentina and Brazil as countries on the forefront of the region’s economic stability and startup incubation.

“Nasdaq continues to be home to the world’s premier high-tech companies and growth companies, including innovative Latin America-based companies across a variety of industries that have chosen to list on Nasdaq. Also, numerous companies in the region are members of Nasdaq’s International Designation, which offers visibility to international companies that are Level 1 ADRs that trade on the over-the-counter market. The new technology boom in Latin America creates an exciting new narrative for the region. We expect continued momentum from Latin America in the near future and look forward to welcome more of the businesses driving this innovation to the Nasdaq family.” {SOURCE}

 

A Herd of Unicorns

Currently, there are 48 FinTech Unicorn companies with a combined valuation of $187 Billion.  Q2 and the current Q3 quarter has already seen the birth of 7 unicorns.

North America:

Carta

Lemonade

Bill.com

Marqueta

Hippo

Europe:

Checkout.com

IvaluA

Asia:

Liquid

Australia:

Judo Bank

 

North America has a potent mix of industry-disrupting FinTech companies. Our top 5 favorites are:

  1. Lemonade, the online rental/home insurance company that allows users to quickly obtain insurance in just a few clicks of their app.
  2. Robinhood, a trading platform that gives free stocks away as a signup bonus. Users have reported receiving high-value commodities from automotive and engird companies.
  3. Bill.com, the preferred method of paying employees and bills at most startups these days.
  4. Chime, a prepaid bank that saw an increase in subscribers after NetSpend’s direct deposit fiasco earlier this year.
  5. Credit Karma, provides tracking of your credit report, alerts, and ability to file disputes in-app for all 3 of the major credit bureaus.  It’s simple, hip interface makes credit score checks a little less painful.

Serving the Under Banked

Online banking has come a long way from Simple’s launch in 2012. There are currently 30 companies either launched or on the waitlist since 2018, compared to a total of 8 from 2012-2017.  Q3 is on track to hit a record almost $1b in funding for Challenger banks.

Leading the way is Brazil’s NU Bank, an online bank that focuses solely on the underbanked and unbanked. The company has a total of $1.1 billion in funding and just recently opened their Mexico division May, with Colombian and Argentina divisions coming soon.

Mexico is on target to become the next hot spot for Challenger banks, with six companies, including Uber launching options for underbanked.  In May, Uber launched its first B2B debit card option for drivers in Mexico.

Banking-as-a-Service is increasing by developing a partnership with key partners. BankMobile, a digital finance company, has partnered with T-mobile Money to grow their college student market. Even Paypal and Venmo have partnered with Bancorp to launch a new series of debit cards.  BaaS is the latest way for banks to reinvent themselves and increase profitability.

Conclusion

Even though every region was down, funding in 2019 Q2 for FinTech was over $8 billion, including a record number of $100 million mega-rounds carried by Series D and E+ rounds.

Challenger Banks and Latin America were the biggest winners this quarter. Challenger Banks have already surpassed 2018’s total funding, despite only being in Q2.  LATAM’s newly found stability means that it will continue to see mega-rounds, especially in the area of underbanked.

Keep your eyes on new unicorns in the areas of banking-as-a-service and challenger banks for the rest of 2019.