Funding for financial technology (Fintech) companies has seen its worst period as a result of the Coronavirus disease (COVID-19) pandemic resulting in just $1.1 billion investments in the first quarter 2020.
According to data collated by research outlet CB Insights, subsector, across the board, fintech funding activity stalled as the pandemic forced investors to pull back investments.
The COVID-19 outbreak had a significant impact on fintech financing, resulting in the worst Q1 since 2016 for fintech deals and the worst Q1 for funding since 2017. With forecasts of a recession, investors pulled back on early-stage bets to focus on fortifying portfolios.
The Q1’20 early-stage (seed & Series A) fintech startups saw 228 deals, a 13-quarter low, and $1.1 billion in funding, a 9-quarter low. Fintech funding in Asia, North America, Australia, South America, and Africa dropped quarter-over-quarter.
In Q1’20, Asia saw a 69 per cent drop in funding (to $883 million) and a 23 per cent drop in deals quarter-over-quarter. Europe was the only major region to see an increase in funding, driven by four mega-rounds of $100 million plus, including Revolut’s $500 million Series D and Qonto’s $115 million Series C.
The firm said there is low sentiment among investors for a fintech mergers and acquisitions (M&A) spree in 2020, as valuations decline and funding dries up. This is a trend that has been picked up by other research houses, with robo-advisors, marketplace lenders and challenger banks seen as among the most vulnerable sectors.