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FinTechs, are you worth it?

Very interesting article on AltFi about FinTech unicorns tripling in value this year. Here’s a few selected lines:

In the first quarter of 2021 alone, UK fintechs raised more than $2.9bn in funding, an increase of 331 per cent on the same period in the year before … in June 2020, Checkout.com became one of the first fintechs to triple its valuation, following a $150m Series B fundraising effort. Come January of this year, Checkout.com’s valuation had jumped from the $5.5bn it reached in June 2020, up to $15bn, nearly tripling for the second time … payment infrastructure provider Stripe became the highest valued fintech in the world once again following a $600m raise in March and saw its valuation skyrocket to $95bn, 2.6 times its previous valuation and making it one of the highest valued private companies in the world … similarly, financial API provider Plaid, which recently nixed a $5.3bn takeover deal from Visa, raised fresh capital at a much higher valuation. The fintech’s valuation jumped from $5.3bn to $13.6 in April 2021, two and a half times higher than its previous price tag … Klarna, the biggest buy-now-pay-later fintech in the world is also a member of the elite triple valuation group. The BNPL fintech closed one of the biggest rounds fintech has ever seen earlier on this year, scooping a $1bn funding round in March at a $31bn valuation, just under triple its $10.65bn valuation from its previous raise in September 2020 … another fintech to have tripled its valuation not in the payments space is Wealthsimple. The Canadian investment platform closed a C$750m (£439m) funding round and saw its valuation jump from $1.5bn up to $5bn— a valuation more than 3 times higher.

Interesting examples and stats.

The writer asks: is this a trend or coincidence? with a conclusion that leans towards the latter.

But let’s be clear: there are things happening in this decade that are unprecedented. I hate that word, but I use it for a reason. This is not normal. What is normal? What is the new normal? Will there ever be a normal?

There are actually two things happening here. First, is the tectonic plates changing from paper to data, driven by the pandemic; the second is the irrational movement of crowds.

We are in boom and bust times, driven by the investment community that now comprises day-traders as well as market-makers. The outcomes will be that there will be major winners. The companies named by AltFi are likely to be the Amazon’s and Google’s of digital FinTech. BTC are ETH are likely to be the new global reserve currencies of the world, some might argue.

I’m not a betting man – as I said that other day, I have crypto but treat it as an experiment – but what I can see happening is a New World Order, a theme I return to regularly. The New World Order is being created by the ABCD of technologies:

  • A is for Artificial Intelligence and Marchine Learning;
  • B is for Blockchain and Distributed Ledger Technologies
  • C is for Cloud Computing and cryptocurrencies; and
  • D is for Digital, Data and Data Analytics.

The New World Order is being created by the ABCD of technologies, and FinTech, digital and cryptocurrencies are a consequence of that. Keeping up the tectonic movement from paper to data or, if you prefer, from industrial analogues to digital natives, is not a coincidence. It’s a trend.

That’s the reason why so many are speculating on the Stripe’s and Klarna’s, BTC’s and ETH’s. They want to have the sky-rocketing returns from betting on a winner. Thing is for every winner, there’s hundreds of losers. It’s just the way it is.

 

About Chris M Skinner

Chris Skinner is best known as an independent commentator on the financial markets through his blog, TheFinanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here...

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