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Challenger banks got record funding, Brazil triples & China declines in 2019: Accenture

Challenger banks are the new poster-boys of the global FinTech ecosystem as the segment witnessed strong growth in fintech investments. Funding into challenger banks has more than tripled in 2019 at $5.2 billion from $1.6 billion in 2018, led by a significant $726 million investment raised by Italian digital bank and card processor Nexi. Funding worth $683 million by South Korea’s NAVER Financial, and $700 million that Chime raised in two separate transactions in the U.S, also pumped up the deal volumes for Challenger banks.

In Brazil, investors poured $400 million into the country’s largest Fintech, Nubank, and US$344 million into rival Banco Intermedium. Besides, Germany’s N26 raised US$470 million from two separate deals, and U.K. neobanks Monzo and Starling Bank raised US$144 million and US$211 million, respectively, the latter from two separate transactions, as per an Accenture’s analysis from CB Insights, a global venture-finance data, and analytics firm.

 The report further added that with Singapore, Australia, and other markets all issuing new digital banking licenses and established players like Revolut and Monzo venturing into new markets, challenger banks could remain a focus for investors in 2020.

Investments into payments startups and lending startups also took the bulk of global fintech fundraising, accounting for 28% and 25% of the total, respectively, while insurtechs raked in 13%,  as per Accenture’s analysis.

Sonali Kulkarni, Managing Director – Financial Services, Accenture in India, said, “There is a lot brewing in India’s fintech ecosystem, and this steady flow of funds shows investors’ confidence in the industry’s future growth potential. The increase both in deal value and the number of deals is a good indicator of what’s to come and bodes well for the future development of cutting-edge financial technology in the country.”

Investments in financial technology (fintech) ventures rose sharply in most major markets in 2019, led by gains in the U.S. and U.K. and emerging economies such as India and Brazil. However, despite those gains, the total value of fintech deals globally dipped 3.7%, to $53.3 billion from $55.3 billion in 2018, when totals got a boost by a record $14 billion from Ant Financial and three other multi-billion-dollar transactions from Chinese companies.

The value of deals in the U.S. jumped 54%, to US$26.1 billion, with the number of transactions rising 6.9%, to 1,232, signaling that investors remain confident about the future growth and demand for innovative digital solutions for banks, insurers and payments providers. The most considerable portion of U.S. funding went to lending startups and those in payments, each accounting for 26% of the total, while insurtechs took in another 18%. The country’s largest deal was the $1 billion that consumer finance fintech Figure Technologies Inc secured from a credit facility in May.

In the U.K., fintech investments rose 63%, to $6.3 billion — almost the same as the total for 2018 and 2017 combined. Other European markets also made significant strides, with investments in German FinTechs up 83% in 2019, to $1.5 billion, and fundraising in Sweden jumping more than seven-fold, to $1.3 billion from about $175 million.

While the value of deals in Brazil nearly tripled at $1.6 billion, making the country the world’s fifth-largest fintech fundraising center, Fintech deals in China dropped 92% in 2019 to $1.9 billion.

IBS Intelligence in January reported that the global investments into Chinese FinTech start-ups had declined sharply by over seven times at $4.9 billion in 2019, after reaching a peak of $34 billion in 2018. The investments have declined for both the B2B and B2C financial technology start-ups and companies in Asia’s largest economy, as per data by business intelligence firm Tracxn.

As per the Tracxn data,  B2C and B2B FinTech firms raised a mere $2.15 billion and $2.75 billion respectively in 2019 as compared with $16.78 billion and $17.92 billion the previous year. The investments in 2019 dropped to a three year low. In 2017, about 218 companies raised a total of $8.4 billion. With a decline in funding, the total number of FinTechs that raised funds in 2019 has also declined by over two times.

However, there were substantial fundraising gains elsewhere in the Asia Pacific. Investments in India nearly doubled, to $3.7 billion, making the country the world’s third-largest fintech market. The value of deals more than increased in Singapore, to $861 million, and rose nearly 50% in Australia, to $1.1 billion.

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