Total fintech investment across M&A, VC and PE in the US nudged up slightly in 2019 to set a new annual record of $59.8 billion. The strong level of fintech funding was propelled by the $22 billion acquisition of payments processing company First Data by Fiserv.
US-based fintech VC investment achieved several new records during 2019. Q3’19 saw quarterly fintech investment reach $5.06 billion — nearly on par with the record $5.07 billion in Q2’19. These two quarters helped annual VC funding in fintech to a record annual high of $17.4 billion.
Diversity of investments driving growth in the US fintech market
The ongoing investor focus on late stage deals combined with the growing maturity of fintechs across the US, and the expansion of fintech beyond the traditional payments and lending spaces helped to drive a strong deals environment.
Competition heating up in the digital banking space
The digital banking space in the US saw a strong increase in activity as European challenger banks expanded into the US market and homegrown players works to achieve greater scale.
Insurtech space continuing to gain traction in US
Corporate investment was particularly strong as traditional insurers increasingly recognized the importance of modernizing their technology stack and their consumer and business offerings.
Strong number if unicorn births highlights growing maturity of the fintech sector
2019 saw 12 new fintech unicorns birthed in the US. The diversity of these new unicorns highlights the growing maturity of different subsectors of fintech.
B2B companies gaining significant traction from investors
Fintechs able to enhance business capabilities and improve transaction times or customer responsiveness for financial institutions will likely draw close attention from fintech investors.
Fintech M&A activity in the US remains steady
A significant amount of M&A activity continued to focus on the payments space, and a large portion of this activity is propelled by corporates looking to scale up their digital offerings.
It was a very strong year for fintech in the United States. All the disruption that we see across financial services is creating opportunities for fintechs across the board. B2B focused fintechs are particularly attractive to investors given the large number of financial institutions looking for ways to improve their digital offerings and customer experience to their small business and corporate clients – not to mention helping their clients become more operationally efficient.
Looking forward into 2020, fintech activity is expected to remain strong, with continued activity in the payments sector. The challenger banking space is expected to continue to be hot, with competition coming from proven challenger banks in the UK that have targeted the US as part of their expansion efforts. Insurtech and proptech are also expected to remain strong areas for fintech investment.
Over the next few quarters, there will also likely be a continued proliferation of fintechs partnering with banks and other financial institutions. As AI capabilities become more mature, these partnerships will be critical for financial institutions looking to provide stronger personalization to their customers.