Although the COVID-19 pandemic stunted growth in many sectors, a recent report shows that fintech startups and challengers has a remarkably successful year on the fundraising front.
Globally “buy now, pay later” (BNPL) fintech startups raised record funding in 2020 and insurtech companies saw a big bump in fundraising in the second half of 2020.
The CB Insights report showed in 2020 BNPL companies raised nearly $1.5 billion in funding partly due to the boost the e-commerce industry saw because of the pandemic. In 2019, BNPL companies raised about $1.0 billion in total funding.
Alex Kern, intelligence analyst at CB Insights said he was surprised to see how much fundraising and deal activity was occurring in the BNPL industry because when a consumer is at checkout while shopping online there’s only so much room for different BNPL options, since a consumer doesn’t want to see numerous different BNPL options.
Globally, insurtech companies also saw a 64% increase in funding in the second half of 2020 compared to the first half of 2020. In the first half of the year insurtech companies saw $2.5 billion in funding whereas funding ramped up to $4.1 billion in the second half of the year.
Additionally, merger and acquisition activity for insurtech companies is also heating up. In 2020 the sector saw 16 M&A deals, a sharp increase compared to the 5 M&A deals it saw in 2019. Kern said he didn’t think this trend was as related to the pandemic. MassMutual‘s acquisition of Flourish, and Bestow‘s acquisition of Centurion are notable examples of 2020 insurtech transactions.
“I’m not sure that was as much of a COVID-related phenomenon, [as much as it is] these companies starting to develop the technology needed to perform telematics.”
The report found that overall, the global fintech industry saw a slight decline in funding and deal activity, specifically 2% and 13% year-over-year respectively. Every fintech vertical the report tracks saw a decline except for small-to-medium-businesses, which grew 13% year-over-year. Fintech startups that address payroll operations gained significant traction in 2020.
Kern explained there’s a lot of low hanging fruit for not only SMB, but startups that provide back office functions that automate processes. He also said that at this point, he’s personally more excited about opportunities in B2B startups than B2C.
“We considered the last year or so really focused on consumer facing apps,” he said. “There’s a lot more B2B companies gaining traction now — and insurtech [companies are] a big piece of that.”
In recent BNPL news, Klarna shared that it is seeing “tremendous momentum in the US, including a record 15 million customers overall to kick off 2021.” In 2020, the company more than doubled the total number of users in the United States to 15 million. More than 1 million US customers have joined Klarna each month since October 2020.
Meanwhile, in the insurtech world, Metromile announced that Ryan Graves plans to make a $50 million investment in the company both personally and through his investment firm Saltwater. Graves was formerly senior vice president of global operations Uber Technologies.