The total value invested so far this year is only $200m less than the $17.7bn raised in the previous four years combined
- This record-breaking year can be explained by the $14bn funding round raised by Ant Financial, which is currently the largest recorded deal in the FinTech space. The main investors were Singapore’s sovereign fund GIC and Temasek Holdings, also a Singaporean company owned by the government. The China-based FinTech conglomerate is the highest valued unicorn globally at $150bn and this previous funding round makes up 79.7% of total capital raised in the sector in 2018.
- However, even excluding this deal, the total amount invested in the first three quarters of this year is already at 99.3% of 2017’s level. The largest deal after Ant Financial was the $575m raised in post IPO equity by Singapore-based company Sea. Sea offers a digital financial services platform, AirPay, which provides e-wallet services via a mobile App. This was the company’s first funding round since its IPO in October 2017, which raised over $1bn. Sea will use this latest capital injection for general cost and business expansion.
- Currently, the number of deals in 2018 has just topped 100 and looks set to slightly decrease from last year. This year the top ten deals are responsible for 91.3% of the total funding to the sector.
Global PayTech investment in Q3 2018 has more than doubled compared to the same quarter last year
- The third quarter of the year saw $1.5bn invested across 38 deals, this is 2.5 times the capital raised in Q3 2017. The largest deal in this quarter was $365m raised by One97 Communications. One97 Communications company’s sub-organisation Paytm is a digital e-commerce payment system and digital wallet company.
- Deal activity in Q3 2018 reached the highest level in the past five quarters. Out of the 38 deals in that three-month period there were five over $100m which together make up 66.0% of the total amount invested in the quarter.
- The second quarter has seen the most investment this year. The previously mentioned $14bn Ant Financial deal occurred in that period. However, even excluding this funding round, Q2 is still the strongest quarter this year.
Mobile Payments companies have completed the most deals in the PayTech sector since 2014
- For the past four years companies in the Mobile Payments subsector have attracted on average 44.4% of total deal activity in the PayTech sector. In 2018, 46 of the 101 deals so far have been raised by Mobile Payments companies. This year the two largest were the previously mentioned deals completed by Sea and Ant Financial. The third biggest funding round was $245m raised by San Francisco-based Stripe. The company helps businesses accept payments online. Stripe plans to use the funds to expand its operations in India and Southeast Asia, where it expects to acquire more than half a billion online customers over the next three years.
- Point of Sale, the second largest subsector, has made up on average 36.1% of total deal activity since 2014. Also, its share of deal activity has been steadily increasing and this year it is 8.3 percentage points (pp) higher than four years ago as consumers switch away from cash. The largest deal in this subsector this year was the previously mentioned deal with One97 Communications. In fact, three out of the four largest funding rounds completed in this sector since 2014 totalling $2.4bn were all raised by One97Communications.
- Another noticeable deal in the Point of Sale subsector was $115m raised by Toast. The US unicorn is an all-in-one point-of-sale and restaurant management platform. The Series D round was led by T. Rowe Price, a public American global asset management firm.
- Deal activity in the P2P Payments and B2B payments subsectors has trailed. In 2018, they constituted for just 15.8% of total deal activity combined. The largest deal in both these subsectors was $250m raised in a series E round by US company Tradeshift in the second quarter of this year. The company helps connect supply chains with digital marketplaces, payments, and apps. Goldman Sachs and PSP Investments, one of Canada’s largest pension funds, led the round and other participants included HSBC. The CEO announced this fresh capital will be used to, “continue rapid growth and consolidate [their] leadership position.â€Â This was the only deal in these two subsectors to reach the top 10 deals in the last four years.
A broad spectrum of firms are investing in companies in the PayTech sector
- The seven most active investors in the PayTech subsector have taken part in 82 deals in the past four years. This list includes venture capital firms, seed accelerators, financial institutions and private equity firms.
- The most active investor, 500 Startups, participated in 18 of these deals. The venture capital seed fund has so far invested in over 2,000 companies, which span more than 60 countries.
- The second most active investors are seed accelerator Y Combinator and venture capital firm Digital Currency Group, which have each taken part in 14 deals each since 2014. The cumulative valuation of companies invested in by Y Combinator is over $100bn and this portfolio of companies includes Airbnb, the previously mentioned Stripe and Dropbox.
- Goldman Sachs is the only financial institution present in the most active investors ranking. The US investment bank has participated in eight funding rounds. Three of these were in 2018 including the previously mentioned Tradeshift deal.
The data for this research was taken from the FinTech Global database. More in-depth data and analytics on investments and companies across all FinTech sectors and regions around the world are available to subscribers of FinTech Global. ©2018 FinTech Global
