Fintech funding contracted in the first quarter of 2020 as the Covid-19 fallout began to hit late on, according to a Forrester report that warns that many firms will bite the dust as the crisis really kicks in.
Global fintech funding during the first quarter was $5.78 billion, down from $7.77 billion in the fourth quarter of last year and $12.59 billion in Q3 2019.
Forrester notes that funding was already in decline by the end of last year, but the Covid-19 crisis is already taking a toll. The economic shock from the virus took hold globally by early March, which sank hopes for many companies. And while 24 companies closed rounds in March compared to 25 in February, investors were less generous.
The biggest round of the quarter was $500 million for UK-based digital bank Revolut, but in March the top funding was $100 million for Mexican lender Credijusto. Mainland China was the first region to shut down, and no Chinese fintechs closed rounds despite a steady stream of funding there for the past few years.
More generally, investors are becoming increasingly cautious, flocking to late stage companies in well established, or even crowded, sectors.
And, as the fallout from the pandemic continues, Forrester predicts that many fintechs will fold or be bought up by incumbents.
Says the report: “The last two economic downturns saw a huge reduction in private financing. This time won’t be different. Only fintechs that had market traction, were profitable, or had secured a big funding round before Covid-19 struck will survive the upcoming consolidation.”