Report: fintech startups throughout India, Africa, and Latin America raised a complete of $23B since 2017; Indian corporations raised $11.6B, together with $4.8B simply in 2019 — Tech investments in rising markets have been in full swing over the previous couple of years and their ecosystems have thrived because of this.
In emerging markets, fintechs are dominated by payments, lending, and neobanks, according to a new report
It has been a couple of years since tech investments in emerging markets have been in full swing and as a result the ecosystems in these countries have flourished.
In some of these regions, such as Africa, Latin America, and India, there are comprehensive reports that have been compiled by publications and firms that give an understanding of the trends and investments in their specific regions. There doesn’t seem to be any report that compares and contrasts trends and investments between these regions, and that is quite understandable. The task at hand is Herculean in scale.
Well, a new report released today by Briter Bridges and Catalyst Fund offers a comprehensive view of a sector that has been at the forefront of these three markets for quite some time: Fintech. The report, which can be found here, is excelling above its weight to provide an overview of these three markets as a whole.
In this report entitled “State of Fintech in Emerging Markets Report”, the authors aim to analyze the investment, product, and inclusion trends across emerging markets in order to make predictions for the future.
As a result of the survey, over 177 startups and 33 investors from Africa, Latin America and India participated in the study. In spite of the minuscule sample size used in this study, the key findings are quite impressive despite its small size.
It’s time to dive in and find out what’s going on.
A total of $23 billion has been raised by fintechs across all regions since 2017
Emerging markets are unstoppable when it comes to their favorite. Since the sector is expected to receive the largest share of investments over the next five years, it continues to receive the largest share of investments.
Approximately 17% of the world’s unbanked population is made up of more than 300 million unbanked African adults. The fact that five mega-deals were recorded in 2019 in the continent, including Branch, Tala, World Remit, Interswitch and OPay, amounting to a total of over $775 million, is not difficult to explain. The amount of funding raised by companies such as Flutterwave, TymeBank and Kuda during this period of time ranged from $362 million to $415 million.
Latin America is a region that boasts a growing base of digital users, enabling reforms and regulations, and a vibrant small business sector. It is just like Africa, where the percentage of people who are unbanked is high at 70%. The fintechs in the region have taken advantage of the opportunity to raise mega-rounds of capital, and many of them have been successful in this endeavour, including NuBank, Neon, Konfio, and Clip. It has been estimated that fintech startups have raised $10 billion in the last five years collectively.
There was a record amount of funding raised by Indian fintech startups in 2019 alone of $4.8 billion, the report shows. A total of $3 billion was brought in by this sector last year. The investments have totaled $11.6 billion over the last five years. Among the most prominent names are CRED, Razorpay, Groww, BharatPe, among others, who have accounted for the majority of the funds.
In terms of seed rounds, Africa has an average of $1M, while India and Latin America have an average of $4M
During the last five years, the value of early-stage deals in Africa has increased by over $1.6 billion, as per the report. As of 2020, the average size of their seed rounds is expected to reach $1 million, an increase from $750,000 in 2017.
During the last five years, the average seed deal in Latin America has been around $5.7 million while the average seed deal in India has been about $4.6 million. According to the report, the data for the latter has been skewed due to the fact that CRED raised $30 million as seed funding.
There is a boom in IPOs in Latin America, unicorns are bred in India, and African dealmaking is still quite young
As a result of its size and homegrown status, Stripe’s acquisition of Nigeria’s Paystack constituted one of the biggest M&As in Africa last year due to its size and the fact that it was an acquisition by a prominent US company. As well as the DPO Group buyout by Network International for $288 million, there were several other larger rounds that grabbed the headlines, including the $500 million acquisition of Wave by WorldRemit (the largest deal from the continent) and the $700 million acquisition of WorldRemit by DHL.
Fintech activity in the payment, credit and neobanking sectors is at an all-time high
In the report, it is shown that the payment companies are, in the three regions, the crème de la crème for fintech investments. This subset of payments is dominated by B2B payments, which are the most common. It is likely that credit and digital banking will be the next two categories of fintech that will be funded.
There has been a significant increase in investments in payments startups in Africa, as compared to credit and neobanks. It is easy to think of Flutterwave, Chipper Cash, Wave, Paystack and DPO when I look at these systems.
There is a great deal of excitement among investors regarding the future of insurance, payment methods and digital banks
In a recent report on future trends in fintech products five years from now, a handful of investors were surveyed on their expectations for the direction of fintech products in the future. The majority of them were favoring insurance, payments, and digital banking.
Embedded models and investment platforms are also areas of interest for us. Agribusiness and remittances were seen as less important while wealth tech platforms and neobanks were also seen as less important by respondents. Why does it seem that digital banking and neobanking are on opposite ends of the spectrum when it comes to the choice of investments for investors? As far as I know, I am unable to answer that question.