Much more money is pouring into fintech than usual
AN AIR OF hype habitually surrounds the founders of startups and their venture-capital backers: everyone is an evangelist for their latest project. But even allowing for that zeal, something astonishing is going on in fintech. Much more money is pouring into it than usual. In the second quarter of the year alone it attracted $34bn in venture-capital funding, a record, reckons CB Insights, a data provider . One in every five dollars invested by venture capital this year has gone into fintech.
This blizzard of activity reflects demand from investors as they hunt for juicy returns and as the digital surge in finance takes off. But it also reveals something more profound. Once the insurgents of finance, fintech firms are becoming part of the establishment. The craze also extends beyond payments. A surge in savings in rich countries in the past year has boosted so-called “wealth-tech” startups, such as online brokers and investment advisers. Insurance-tech firms received $1.8bn through 82 deals globally in the first quarter of this year. Lending has proved trickier to disrupt—perhaps owing to regulators’ firmer grip on this area of finance—except when it crosses over into payments, as illustrated by the rise of Klarna and its rivals.
Moreover, some institutional investors—such as asset managers , sovereign-wealth funds and pension funds —have made a lot of money by snapping up shares in big tech firms in recent years. These are now trying to gain an edge by investing in promising startups before they go public.
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