Financial Technology Sector Overview - Q1 2018

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The financial technology sector has seen a lot of momentum in funding and exits in recent years. As we previously noted, fintech funding has shifted to later stages and its exit events have skyrocketed. 

We will now take a closer look at the different components of financial technology and how they make up this startup ecosystem. We have classified the companies into 16 categories. This blog post will illustrate what these categories are and which categories have the most companies. We will also look at how these categories compare with one another in terms of their funding and maturity.

Consumer Lending Is the Largest Financial Technology Category

Let’s start off by looking at the Sector Map for the financial technology sector. As of March 2018, we have classified 2407 financial technology startups into 16 categories that have raised $90 billion. The Sector Map highlights the number of companies in each category. It also shows a random sampling of companies in each category.

Fintech Sector Map

We see that Consumer Lending is the largest category with 321 companies. These companies offer new ways for consumers to obtain personal loans and have their credit risks assessed. They include peer-to-peer lending, micro-financing, big data analytics, and consumer credit scoring services. Some example companies are SoFi, CommonBond, Avant, and Lufax.

We have seen what the different categories making up this sector are and the number of companies in each. What about their funding and maturity in relation to one another? Let’s look at our Innovation Quadrant to find out.

Payments Backend Is the Heavyweight Category in Financial Technology

Our Innovation Quadrant divides the financial technology categories into four different quadrants.

Fintech Innovation Quadrant

We see that the Pioneers quadrant has the most financial technology categories with 10. The Pioneer categories are in the earlier stages of funding and maturity. The Disruptors quadrant contains three categories: Consumer Lending, Business Lending, and Consumer Payments. These three categories have acquired significant financings at a young age. The Established quadrant includes Banking Infrastructure and Transaction Security. These two categories have reached maturity with less financing. The Heavyweights quadrant contains the Payments Backend category. This category has reached maturity with significant financing. 

It’s interesting to see that both lending categories, Consumer Lending and Business Lending, are Disruptors. This indicates that lending startups have transformed the fintech industry with their venture capital backing at early ages. In addition, the Heavyweight category, Payments Backend, is the one that leads fintech in exit activity as we saw in our exits blog post. This makes sense since mature and well-funded companies are more likely to be acquired or go public than those that aren’t. 

We've now seen the financial technology categories and their relative stages of innovation. How do these categories stack up against one another? Let’s look at the Total Funding and Company Count Graph.

Consumer Lending Startups Have the Most Funding and Companies

The graph below shows the total amount of venture funding and company count in each category.

Fintech Funding and Company Count

As noted earlier, the Consumer Lending category leads financial technology with 321 companies. In addition, the above graphic highlights that Consumer Lending also leads in funding with over $28 billion. Some of the best-funded companies in this category are JD Finance ($3.01B), SoFi ($2.08B), and Avant ($1.78B). 

It’s noteworthy that the funding in Consumer Lending is 81% higher than the funding in the next category, Business Lending. Business Lending companies offer new ways for businesses to raise debt financing and have their credit risks assessed. Some example companies include Bond Street, LendInvest, BlueVine, and Funding Circle.

Conclusion: The Consumer Lending Category Leads the Fintech Sector

From the above analysis, we can see the Consumer Lending category leads financial technology in funding and company count. On the other hand, the Payments Backend category stands out as the Heavyweight category in our Innovation Quadrant. It has reached maturity with significant average funding per company versus other categories. It’ll be interesting to see how the financial technology landscape will change and develop throughout the rest of 2018.

To learn more about our complete financial technology report and research platform, visit us at www.venturescanner.com or contact us at [email protected].

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