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No wonder they don't charge monthly fees.
Fintech companies have raised an incredible $39.2 billion this year, according to new Pitchbook data released Monday, effectively doubling the $20.4 billion raised in all of 2020.
The Second Most Valuable Bank in Germany
Fintech is sort of a catch-all umbrella term for everything from digital banks to cryptocurrency exchanges to payment platforms. What's clear by now is that if you figure out an effective way of digitizing financial services, there'll be a lineup of venture capitalists outside your door longer than a Tolstoy novel.
As a result, tech companies with Wall Street's business in their crosshairs aren't just upstart players anymore, they're increasingly seen as credible alternatives worthy of massive investments:
- There have been 1,280 VC fintech deals this year, up from 1,078 in all of 2020. The average deal size is $36.2 million in 2021, up from $22 million last year.
- On Monday, Berlin-based fintech bank N26 said it raised $900 million, valuing it at $9 billion. That makes it the second most valuable bank in Germany, behind only Deutsche. Other huge investments this year include payments platform Stripe, which raised $600 million at a $95 billion valuation, and Crypto trading platform FTX, which raised $900 million at an $18 billion valuation.
Giving Old Money Fits: The rise in fintechs has been a particular pain for America's traditional big banks. Costs at JPMorgan Chase, Goldman Sachs, Morgan Stanley, Bank of America and Citigroup rose $6.6 billion, or a 10% increase, in the second quarter as the old firms spent bigger on technology. Their costs have soared 21% higher than before the pandemic, dragging on profit margins.
Coming to a Stock Market Near You: Fintechs have reached the point of maturity where they're becoming featured attractions on public exchanges: crypto platform Coinbase went public in April and stock trading app Robinhood in August. There'll be many more to follow.