Dive Brief:

• Private payments firms confronted funding challenges last year as volume dropped by 47% to $7 billion, and the number of deals declined 23% to 392, according to an analysis of the payments industry by S&P Global Market Intelligence.
• Among publicly-traded payments firms, more than half had negative stock returns for the year ending Feb. 13, 2025, despite more than three-quarters of them (77%) showing revenue growth, said the report, released Tuesday. (S&P limited its analysis of public stock returns to 93 companies with annual revenue of at least $100 million.)
• Globally, the payments field counts about 8,400 companies, with “a massive market opportunity,” according to the S&P report. The research firm forecast $172 billion in revenue “up for grabs by 2030” in just the payment processing and merchant acquisition segment.

Dive Insight:

“The payment-specific decline in startup funding … is simply a function of venture capital becoming very selective across the board,” Sampath Sharma Nariyanuri, a senior research analyst at S&P Global Market Intelligence, said in a Wednesday interview. “Venture capitalists have become extremely selective in terms of who they want to give money to.”

VC investors are prioritizing fintechs that offer “strong unit economics, product differentiation, and sustainable models,” according to the report. “B2B payments startups — particularly those addressing inefficiencies in invoicing, cross-border transactions and embedded finance — are well-positioned for continued funding interest.”

In 2024, merger and acquisition deals in the payments industry climbed to 220 deals worth $48 billion, jumping significantly in value from 208 deals at $26 billion the prior year, according to S&P.

While large players such as Stripe and Klarna command heavy industry buzz, the bulk of venture funding in 2024, $2.7 billion, was directed toward digital wallet and neobank startups, followed by merchant acquirers ($1.8 billion), according to the report.

For private funding in recent years, digital payment processor Stripe raised the most capital from 2021 to 2024 – more than $8 billion in three rounds – followed by Klarna, the buy now, pay later operator, with $2.45 billion in six rounds. 

Despite a sluggish market for public offerings last year, Klarna said Friday it plans to have new shares begin trading this year on the New York Stock Exchange, perhaps capitalizing on investors’ enthusiasm for providers of installment payment offerings.

Macroeconomic trends – including a global trade war by the Trump administration, the prospect of a U.S. recession and declining consumer sentiment – could “increase the uncertainty” for any financial tech company contemplating a public offering, Nariyanuri said.

“If the overall market sentiment takes a hit from now on, that would certainly jeopardize those IPO plans,” he said.

The report also noted a sharp divergence in the stock performance of fintech companies founded before and after 2000, with more recent new entrants outperforming their older peers, partly due to their disruptive models and technology. Younger startups “are leveraging the new-age technology, the new-age business models,” Nariyanuri said. “That is clearly getting reflected in the public market trends.”