Fintech M&A activity reaches new heights
Fintech exits through mergers and acquisitions (M&A) hit a new all-time high this year, outpacing all of 2020 by 23% to reach 664 deals in Q3 2021 year-to-date (YTD) , according to new data from CB Insights.
These numbers were shared in the State of Fintech Q3’21 report, which explores global investment trends to shed light on emerging trends.
According to the report, global fintech outflows hit new highs this year, driven by M&A activity. Acquisitions in digital lending and banking, in particular, drove the bulk of the activity.
In digital lending, buy now, pay later (BNPL), mergers and acquisitions have been all the rage in 2021, as incumbent banks and payment giants strive to participate in the continued growth of e-commerce . Notable deals in Q3 2021 YTD included Australian giant BNPL Afterpay’s US$26.9 billion megadeal and Zip’s purchase of competitors Twisto and Spotii.
In Q3 2021 year-to-date, 61 digital lending startups were acquired, up 110% in deal count since 2020.
BNPL’s acquisitions continued in the fourth quarter of 2021 with transactions such as PayPal’s $2.73 billion acquisition of Japanese platform BNPL Paidy, GreenSky’s acquisition by Goldman Sachs for $2.24 billion and ShopBack’s purchase of Singaporean platform BNPL Hoolah.
In banking, M&A deals totaled 31 in Q3 2021 year-to-date, pushing the number of deals up 121% since 2020. Deals included Avant’s acquisition of Zero Financial, the acquisition of AlterBank by Meliuz and the purchase of Anytime by Orange Bank.
The 10 largest fintech M&A exits in Q3 2021 totaled $12.6 billion in valuation. These include BillDesk ($4.7 billion), Paidy and CurrencyCloud ($963 million).
Fintech initial public offerings (IPOs) and mergers with blank check companies also increased in Q3 2021 year-to-date, reaching 46 and 14 deals, respectively.
43 new fintech unicorns
43 fintech companies reached unicorn status in Q3 2021, the second highest number of new unicorn births after the peak in Q2 2021. The figure brings the total of fintech unicorns worldwide to 206, twice as many than the number for the third quarter of 2020.
Of the 43 freshly minted unicorns, 21 are from the United States, eight from Asia and six from Europe. The United States continues to lead the world, with a total of 107 unicorns, followed by Asia (41) and Europe (36).
Cryptocurrency exchange FTX was the first unicorn birth in Q3 2021 by valuation. FTX completed a US$900 million Series B funding round in July 2021, bringing the startup’s valuation to US$18 billion. This amount was updated to $1 billion in October with the participation of Singaporean state investor Temasek. FTX also announced a Series B-1 fundraising of US$420 million, bringing its valuation to US$25 billion.
Launched in early 2019, FTX is one of the largest cryptocurrency exchanges in the world, with an average daily volume of US$14 billion.
After FTX, Zepz, formerly WorldRemit, was the second largest unicorn birth in Q3 2021 by valuation. The startup raised US$292 million in a Series E funding round, reaching a US$5 billion valuation. Zepz is a digital cross-border payment platform operating two brands, namely WorldRemit and Sendwave, with over 11 million users in 150 countries.
Fintech Funding Trends
Global fintech funding totaled US$31.1 billion in Q3 2021, down 16% from record highs last quarter, but still recording a 147% year-over-year increase (YoY). This brought the total amount of fintech funding in Q3 2021 year-to-date to US$94.7 billion, surpassing 2020’s total of US$48.4 billion by 96%.
Mega-towers worth US$100 million and above generated the bulk of global fintech funding in Q3 2021, accounting for 64% of quarterly funding. Big rounds in Q3 2021 included Revolut’s US$800 million Series E, Chime’s US$750 million Series G and Kavak’s US$700 million Series E.
Wealthtech saw significant traction, with funding reaching US$2.8 billion. This figure brought the total funds raised in the third quarter of 2021 year-to-date to US$12.7 billion, exceeding the total for the year 2020 by 115%. Notable wealth technology deals in the last quarter include DriveWealth’s $450 million Series D, iCapital Network’s $440 million, and Bitpanda’s $263 million.
Insurtech is another segment that has seen traction in Q3 2021, reaching $10 billion in funding in Q3 2021 year-to-date and surpassing the 2020 total of $7.9 billion. Insurtech transactions in Q3 2021 included Coalition’s US$205 million Series E, Digit Insurance’s US$200 million Series E and At-Bay’s US$185 million.