Payments fintechs lure big bucks in first quarter, report says

Dive Brief:

Payments fintechs attracted $6.03 billion worldwide from venture capital firms during the first quarter, more money than all but one other sector among 8 tracked by research firm CB Insights in its recently released first-quarter report on venture investing in financial technology startups.
That amount directed at payments fintechs was nearly double the $3.6 billion the category attracted in the first quarter last year. The number of deals in the first quarter also rose over the year-ago period to 114 from 99. The first-quarter figures were higher, both in terms of total dollars and number of investments, than any other quarter over the past year.
The payments category attracted 18 “mega-rounds,” or investment rounds in which more than $100 million is raised--that was nearly a third of the record 57 such rounds across all the categories during the first quarter, the CB Insights report said. Those rounds accounted for about 75 percent of funding for payments fintechs, and about 70 percent of the fundraising for all fintechs, driving the average deal size higher.

Dive Insight:

While fintech companies in every region of the world attracted more investments in the first quarter relative to that period last year, North American companies attracted the most while European fintechs had the largest increase, the CB Insights report said. In the payments arena, European fintech companies were a particular magnet for money during the quarter.

Swedish buy now-pay later player Klarna; e-commerce payments processor Stripe, with dual headquarters in Dublin and San Francisco; and British one-stop shop wannabe Checkout.com were among the payments fintechs that raised megarounds during the first quarter, the April 28 report said.

Klarna drew a whopping $1 billion in March while Stripe lured $600 million that month for a new $95 billion valuation, and Checkout.com raised $450 million in January. British B2B commerce payments company Rapyd also raised $300 million in January.

Overall, the fintech companies attracted a record $22.8 billion during the first quarter in 614 fundraising rounds, the CB Insights report said. That was double the amount of money raised in the first quarter of last year (though only a 15 percent rise in the number of rounds). The quarterly activity surpassed the prior high water mark set in the second quarter of 2018, and driven largely by a single $14 billion investment in Ant Group.

Payments companies are attracting a major share of investments as the COVID-19 pandemic is changing the way consumers purchase goods, accelerating trends toward using digital options for less contact and less cash. The pandemic is speeding up similar changes in the way companies pay each other, with increased emphasis on new digital mechanisms and software processing options.

Two New York investment firms were particularly active in the payments investment space. Tiger Global Management and Coatue Management both put money into Checkout.com and Rapyd.

The jump in first-quarter investments for payments fintechs was even starker when compared to the prior fourth quarter of last year. The investments were almost triple the $2.1 billion in the final quarter of last year. The number of investments rose by 50 percent.