Global PayTech investment in 2018 set a new record

The record-breaking year can be attributed to Ant Financial’s $14bn deal

  • Last year global PayTech investment reached $18.0bn across 123 deals, almost 4.0x larger than 2017’s level. The record funding in 2018 was due to Ant Financial’s $14bn deal, the largest FinTech transaction ever, which made up 77.9% of the total capital raised. Not including this funding round, total value invested in PayTech companies hit $4.0bn, a decrease of 12.5% from the previous year.
  • The previously mentioned Ant Financial is a China-based FinTech conglomerate that operates Alipay, which is the largest mobile and online payments platform globally. Earlier this year, Ant Financial bought London-based foreign exchange company WorldFirst for $700m.
  • The second largest deal was $575m raised by Sea in post IPO equity. The company’s digital financial services platform AirPay, offers e-wallet services to consumers and focuses on Greater Southeast Asia, including countries such as Indonesia, Taiwan, Thailand and Malaysia. The capital injection has been earmarked for general costs and business expansion.
  • Deal activity in the sector has been steadily declining YoY from a high of 320 deals in 2015 to a low of 123 transactions last year.

 

The second quarter of 2018 was the strongest for PayTech investment to date

  • The second quarter was by far the best quarter last year for PayTech investment with over $15bn invested. The previously mentioned Ant Financial deal made up 89.3% of the total capital raised in this quarter. Even excluding this deal, Q2 was still the largest quarter for PayTech investment with $1.7bn raised.
  • Additionally, three out of the four largest transactions in 2018 were raised in the second quarter, including the previously mentioned Ant Financial and Sea deals. The third transaction in this bracket was Tradeshift’s $250m Series E round. The California-based business commerce company is a leader in supply chain payments and connects 1.5 million companies across 190 countries. There were nine investors in the round including financial institutions Goldman Sachs, HSBC and GP Bullhound.
  • The last quarter of 2018 saw $386.2m invested, a 63.0% decrease compared with the corresponding quarter in the previous year. Deal activity also decreased from 37 deals in Q4 2017 to 21 deals in Q4 last year. The biggest deal in this quarter was $80m raised by Toss in a Series E round. The Seoul-based startup, which offers over 25 mobile financial services including payments, loans, investments and credit score management, has become South Korea’s first FinTech unicorn with a $1.2bn valuation.

Point of Sale and Mobile Payments companies attracted more than three quarters of deal activity in every region since 2014

  • North America was the strongest region for PayTech deal activity in the last five years with companies in this region completing 513 transactions since 2014. North America was the only region in which Mobile Payments was not the most active subsector. In fact, Point of Sale was the biggest subsector in this region and constituted 41.3% of total deal activity. Additionally, the two largest PayTech deals in North America since 2014 have both been in the Point of Sale subsector. The biggest deal was $3.5bn raised by First Data Corporation in July 2014 in a private equity round. The company is a leader in commerce-enabling technology and serves approximately six million business locations and 4,000 financial institutions. Global investment firm KKR and family office and impact investing business Rancilio Cube both took part in the round.
  • In each of the three remaining regions, Asia, Europe and ROW, the highest proportion of investment has been in the Mobile Payments subsector with companies in the subsector taking 50.1% of total deal activity on average.
  • Companies operating in both the P2P Payments and B2B Payments subsectors have not attracted more than a quarter of total deals in any region over the last five years. In rest of the world, which includes Africa, Australasia and South America, these companies were responsible for just 18.9% of total deal activity. A notable transaction in this bracket was Credit Clear’s $8.5m Series A round in June last year. The Australian-based startup provides a solution for enterprises to significantly improve their effectiveness in collecting payments while also reducing their associated costs. The company is planning to use the new capital for growing its technology and product functionality with the aim of eventually expanding to the US.

 

The share of PayTech deals in Asia has nearly doubled in the last five years

  • The share of funding rounds raised by companies in Asia has increased 11.5 percentage points (pp) since 2014. Additionally, six of the top ten PayTech funding rounds completed last year were raised by companies based in the region. In emerging markets, financial institutions have circumvented the need to build traditional bank branches and can now reach more of the underbanked population through digital payment platforms. In China, for example, users of mobile payments reached 583 million in 2018. This explains Asia’s growing share of PayTech deals which is likely to increase in the future as new platforms, leapfrogging the need for traditional payment methods, become more widespread across Asia.
  • The share of transactions in Rest of World has also grown, almost doubling in the past five years, to 11.4% of total deal activity. Out of the 111 deals raised by PayTech companies in ROW last year, 40 were raised in Africa, 34 transactions were in South America and 37 were in Australia.
  • Companies based in North America have been attracting less deals YoY from 2014 to 2017 and their proportion of deal activity dropped from 54.2% to 38.6%. Although, last year in the region there was a slight increase of 1.2 pp, it is clear that the US is lessening its grip on the Global PayTech market as ecosystems start to develop in different regions around the world.

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. ©2019 FinTech Global

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