Fintech investment globally more than doubled during 2018, driven in part by a small number of mega deals, including the acquisition of WorldPay by Vantiv and the $14 billion VC funding round raised by Ant Financial in H1’18. The second half of 2018 also saw a significant number of large deals, including PE firm Blackstone’s $17 billion investment in Refinitiv (formerly the financial and risk group of Thomson Reuters) and the $3.5 billion acquisition of prepaid card company Blackhawk Network by Silver Lake and P2 Capital Partners. 

All told, 2018 was a year of multiple record highs across fintech investment, including VC, CVC, M&A and PE.

While new startups sprouted across emerging fintech subsectors, highly mature areas like payments saw some consolidation. For example, in 2018 Denmark payments firm Nets merged with German-based Concardis in a multi-billion-dollar deal. At the same time, Nets also carried out a number of other deals, including the acquisition of Poland-based payment firm Dotpay/eCard.

 Growth a top priority for challenger banks across the globe

The growth agenda was a hot topic for fintechs globally during 2018, with later stage and unicorn fintechs raising large rounds, building international partnerships and making their own acquisitions to drive global expansion activities.

This was particularly true among digital challenger banks, which have historically focused on their domestic markets. In 2018, a number of challenger banks made big plays to expand beyond their borders — including Nubank in Brazil, N26 in Germany and several UK-based challenger banks. The growth objective of these companies has been a strong attractor for global investors. For example, China-based technology giant Tencent joined insurance company Allianz in March to invest $160 million in German digital bank N26 to help fuel the bank’s international growth. A number of other Asia-based fintechs have also targeted the use of acquisitions as a means for scaling globally.

In addition to global expansion, many challenger and digital banks also focused on broadening their service offerings throughout 2018 — expanding from niche offerings into a wider range of services similar to those offered by traditional banks. In order to compete effectively both regionally and globally, it is expected that such expansion of services — whether internally or as a result of partnerships — will continue to be a big priority for digital banks. For example, Marcus from Goldman Sachs acquired Clarity Money a personal financial management app for an undisclosed price. According to Goldman this acquisition will bring it more than a 1 million customers.

Big tech players coming onto the scene

Investors focused a significant amount of attention on Software-as-a-Service (SaaS) business models in 2018 and investors in the fintech market were no different.

Many of the big tech players are continuously working to expand their cloud-services offerings, including Alibaba, Google and others. While some of these companies are looking to compete directly with financial institutions, others have primarily focused on developing cloud, AI and machine learning products to enable banks and other financial institutions to launch their own fintech solutions or enhance their internal efficiencies.

In 2018, a number of large fintech players also made their own fintech investments. In September, PayPal acquired Europe-based payments platform iZettle for $2.2 billion, while earlier in the year Workday purchased Adaptive insights for approximately $1.6 billion. Stripe and Credit Karma were also quite active in the M&A space in 2018.