Q2 2024 showed a complex set of challenges and opportunities for startups and enterprises that sought to secure a funding round. While the overall funding environment may have been more cautious and considering the current attitude of investors and the market situation, the second quarter of 2024 still saw companies and financial institutions displaying their abilities, goals, and potential, with many of them leveraging the capital injections to expand their footprint across markets, advancing their products and service suites, optimising their capabilities, and improving customer experiences.
In addition, they also focused on meeting the needs, preferences, and demands of clients and users in an ever-evolving market, while also prioritising the process of remaining compliant with the regulatory requirements of local industries.
According to new data provided by Innovate Finance, the total capital investment made into fintech around the world reached USD 15.9 billion in H1 2024, which represents a decrease of 19% compared to H2 2023 (which was USD 19.5 billion). At the same time, the research shows a shift towards earlier-stage deals; while the average deal size was USD 10 million, reflecting an overall return to early-stage investments.
Although fintech companies and firms continue to face challenges such as data security, legacy systems, and regulation, the possibility of funding is still present as the domain remains important and attractive for investors. The fintech industry stands full of potential, as it focuses its efforts on optimising several key areas such as customer-centric value propositions, digitalisation, financial inclusion, and technologies to anticipate the needs of its client base.
In addition, several businesses and fintech companies focused on the process of accelerating their development in several areas of the industry, as well as further expanding in multiple geographical regions around the world.
One of the first funding announcements released was made by Hokodo, which secured a USD 92 million (EUR 100 million) debt facility to accelerate growth and development. Still in the European region, TransferGo secured USD 10 million for Asia-Pacific expansion, while Flatpay announced the raise of USD 47 million in Series B funding for its expansion in different new markets and building new products. At the end of April 2024, Pomelo raised USD 35 million in a Series A funding round, aimed at product development and market expansion.
With the focus still on the US, Solutions by Text announced the raise of USD 110 million in a new growth financing round, which was aimed at accelerating its development and expansion of payment and AI features. In addition, Félix Pago secured USD 15.5 million in funding for cross-border money transfers.
SumUp represents one of the companies that moved its development strategy across multiple geographical areas around the world, with a USD 1.6 billion (EUR 1.5 billion) investment aimed at refinancing existing debt and offering new global growth opportunities.
Other investments focused on worldwide development were announced by Mexico-based fintech Ximple, which raised USD 2.7 million to launch and expand its credit platform, and digital payments and commerce enablement platform Clip, which raised USD 100 million that was aimed to accelerate its growth processes. In addition, Sipay secured USD 15 million in Series A funding for global development, followed by US-based payments provider Nium, which announced its USD 50 million Series E investment focused on its growth in the B2B payment market.
Zilch also announced its USD 127 million (GBP 100 million) financing deal in late June, leveraging the funds to support its expansion strategy.
Open Banking and Embedded Finance have gained popularity in the last couple of years across multiple geographical regions around the world. By relying on secure and efficient networks, both Open Banking and Embedded Finance are expected to bring improved and innovative solutions to the banking industry as they continue to be developed and incorporated in several parts of the market and by multiple financial institutions and companies. Moreover, the fintech landscape has been improved through Embedded Finance and BaaS, which continue to provide convenience and accessibility to customers, beyond traditional banking and financial institutions.
During Q2 2024, the global trend of Open Banking implementation represented fragmentation despite its widespread acknowledgement and use. Multiple fintech startups that operated in smaller markets decided to position themselves as potential merger and acquisition targets for multiple established players in the market. However, several partnerships were centred around the adoption and development of Open Banking and Embedded Finance, as well as BaaS implementation, as multiple firms and financial institutions aimed to get a more detailed picture of clients' and individuals’ financial situation and strengthen their overall fraud prevention strategy.
One of the first investments that were focused on this area of the industry was announced at the beginning of April 2024, when Canada-based fintech infrastructure company Brim Financial secured USD 85 million in a Series C funding round. The fundings were aimed at supporting the company’s expanding strategy, as well as extending its market reach, forming strategic alliances, and accelerating product development, while also prioritising integrating Open Banking capabilities and platform automation to optimise the credit card and payment infrastructure landscape.
Later in May, three important funding rounds went live, as companies continued their strategy of development. Fintoc, an alum of Y Combinator, secured a USD 7 million Series A funding round to strengthen its presence in Chile and Mexico, US-based Aeropay announced the raise of USD 20 million in Series B financing, aimed at further developing its Open Banking and A2A payments services. Around the same time, Romania-based financial product management platform FintechOS obtained USD 60 million in a Series B+ funding round, which was focused on core modernisation through its financial product management solutions, aimed at improving how financial institutions and banks innovate and adapt to a changing market.
An investment in Brazil-based financial and banking technology service provider Celcoin was leveraged in the same way. The company secured a USD 125 million funding round led by Summit Partners which was aimed at advancing its expansion plans, as well as continuing the process of providing solutions that solidify its position in the BaaS and Embedded Finance market.
Later in June, Egypt-based startup Connect Money secured USD 8 million in seed funding, which was focused on enabling the fintech to introduce five additional business verticals, while Rainforest raised USD 20 million in Series A funding, aimed at offering SaaS providers secure and efficient embedded payments.
The development and improvement of the lending industry continued to gain some popularity in Q2 2024, with companies and firms receiving investments to improve and digitise their suite of solutions and product portfolio, as well as accelerate their overall growth process to provide customers with new, secure, and efficient services.
Following investments that focused on a worldwide reach, one of the first fundings was announced by Sweden-based immigrant banking platform Majority, which secured USD 20 million to cater to the banking of migrants to the US.
During the second quarter of 2024, there has also been a focus on generative AI development and implementation, with multiple companies using the solution to further improve their capabilities and reach user expectations. For example, UK-based startup Finbourne announced the raise of USD 70 million in Series B funding, which was aimed at optimising how financial companies organise and use their data in AI and other models.
Within the first month of Q2 2024, Nu Holdings, a digital financial services platform, announced that it intends to increase Nu Mexico’s equity capitalisation by nearly USD 100 million to improve the company’s position as a foreign investor in the financial sector in the region. Similarly, US-based spend management firm Ramp announced that it secured USD 150 million in a Series D-2 funding round in a bid to expand operations.
Moving our focus to the region of the UK, the digital bank Monzo announced the process of finalising a new USD 636 million (GBP 500 million) expanded funding, through a strategic deal with tech investor Hedosophia, with the investment being expected to represent an important step in the company’s overall development. Later in the same period, alternative finance company Capify secured a USD 127 million (GBP 100 million) credit facility for its development plans and the process of providing SMEs with working capital, while small business lender iwoca raised a new USD 343 million (GBP 270 million) package of debt funding, taking the total gross investment in the company to over USD 1 billion.
Moreover, Capchase, a revenue acceleration platform catering to SaaS companies, secured a USD 114 million (EUR 105 million) credit facility warehouse led by Deutsche Bank. The timing of the investment coincided with a significant uptick in non-dilutive funding activity observed by Capchase among European startups, while the firm aimed to further support UK and European SaaS businesses through its Capchase Grow initiative. This project was developed to provide eligible companies with the needed access to non-dilutive financing, thereby facilitating business growth and development without the need to relinquish equity.
With a priority set on expansion and development, Finance institution GB Bank completed a USD 108 million (GBP 85 million) investment deal aimed at supporting its growth, while UK-based digital bank Monzo also raised an additional USD 190 million, reaching USD 610 million in funding aimed towards expansion and development, as well as the launch of new products.
Impact fintech company Doconomy also announced the raise of a USD 37 million (EUR 34 million) Series B funding round, which was focused on accelerating the firm’s expansion in the region of North America. Later in June, South Africa-based TymeBank aimed for a USD 150 million Series D funding round as it looked to solidify its position in Africa’s digital banking landscape.
During Q2 2024, the banking industry focused on digital development and optimisation, with multiple companies and financial institutions aiming to meet the digital banking requirements, needs, and demands of customers and clients, while also prioritising the process of remaining compliant with the regulatory laws of the industry.
One of the most important investments was announced in April, with Internet Bank Bunq securing a USD 31 million (EUR 29 million) capital injection, as it made a net profit of USD 57 million (EUR 53 million) in 2023 via its increased interest income. The funding round was aimed at the financial institution’s development process, with a focus on meeting the capital requirements of the Dutch Central Bank and increasing its equity.
Later in May 2024, the digital banking platform for small businesses Relay announced that it secured USD 32.2 million in a Series B financing round led by Bain Capital Ventures. The platform aimed to leverage the investment to accelerate the procedure of product development in spend management, smart credit products, as well as financial API marketplace. In addition, the funding also supported Relay’s commitment and strategy to deliver AI-enabled predictive cash flow analytics to SMEs.
With the rising trend of artificial intelligence, machine learning, and digitalisation, as well as the overall expansion and development of generative AI that has been accelerating across industries, fraudsters can leverage the tool and steal personally identifiable information to create branches of credible digital identities. In this context, some investors focused their funding efforts on the process of fighting fraud and other online threats, as well as keeping their customers safe and protected.
With a focus on international development, US-based onboarding solution Footprint raised USD 13 million in Series A in order to continue its efforts in the process of expanding its capabilities. At the same time, PQShield received a USD 37 million investment to address the growing demand for post-quantum cryptography (PQC) solutions across the technology supply chain.
Around the same period, US-based security compliance and risk platform Sprinto raised USD 20 million in a Series B funding round led by Accel to optimise automation within its compliance management platform and expand its client base to encompass companies operating digitally but not primarily in the tech sector. Later in June, SpyCloud obtained USD 35 million aimed at improving its account takeover prevention capabilities.
During Q2 2024, the crypto space managed to attract funds as companies leveraged the capabilities of blockchain to ramp up their expansion efforts, as well as the development of their products and capabilities. At the same time, the crypto startup funding has risen to USD 2.4 billion, a process that was driven mainly by expectations of lower interest rates and the first overall US Bitcoin spot ETF.
In April, Turkey-based retail investing startup Midas raised USD 45 million in a Series A funding round, which was focused on facilitating the firm’s expansion and the launch of three new products: cryptocurrency trading, mutual funds, and savings accounts. Later in May, Kudos secured USD 10 million in funding that was aimed at its AI-powered smart wallet, which was designed to improve credit card usage for rewards and cashback benefits.
Conclusions
While some investors exercised prudence in their overall capital allocation, the second quarter of 2024 still witnessed a secure and dynamic landscape in the global fintech industry. The period also focused on the development and growth strategies of companies around the world, as well as the acceleration of their profitability and financial inclusion.
The fintech landscape also showcased an adaptable industry, with a focus on leveraging investments ranging from traditional services to modernised solutions that will respond to the demands of an ever-evolving market. Investors and enterprises alike demonstrated a commitment to innovation and development, while also prioritising the development of customer-centric solutions that would meet their needs and demands. In addition, they also kept an eye on the pursuit of growth and the acceleration of digitalisation, while also remaining compliant with the regulatory requirements and laws that might differ depending on the industry.
In addition, according to Innovate Finance, across the top 10 global markets, the top three countries continue to be the US, the UK, and India, while France is no longer in the top 10.
In order to access more information on the global developments that emerged during Q2 2024, be sure to follow The Paypers Global Quarterly Analysis series. This also includes partnerships, acquisitions, and contributions surrounding the investments and M&As that took place during this period.
Sînziana is a Junior News Editor with a keen focus on fintech, payments, and digital identity. With a passion for unravelling the complexities of the rapidly evolving technological landscape, Sînziana is dedicated to delivering insightful news that keeps her readers informed.
Every day we send out a free e-mail with the most important headlines of the last 24 hours.
Subscribe now