Global fintech investments top $24 billion in Q2

Investments in the fintech sector jumped to $24 billion globally in the second quarter of 2021, compared to $22.89 billion during the previous quarter, ensuring a bright future for technology and innovation in the banking sector.

The bulk of capital was invested in small and medium business tools at $3.98 billion, payments back end and infrastructure at $3.64 billion, retail investing at $2.36 billion, consumer lending at $2.25 billion, and consumer and commercial banking at $1.86 billion, according to Forrester’s Fintech Funding Roundup.

The promising outlook of fintechs and their potential to dominate the markets are behind the increased investments, according to Forrester principal analyst Peter Wannemacher.

“Conditions are looking more settled and more optimistic. There’s room for investing to increase, which it did,” Wannemacher told Bank Automation News. There’s reason to believe that the next great … direct-to-consumer fintech brands can make money. The emerging reemergence of consumer willingness to experiment with fintech brands … means that they’re worth investing in,” Wannemacher added.

Investors are also starting to believe that somewhere among the fintechs is another Amazon-like company that could dominate the market, he noted. “There is reason to believe that these fintech companies won’t just disrupt markets, but a few of them will actually come to dominate some markets.”

Eight countries are leading this investment trend, with the U.S. at the top, according to Forrester’s report:

  1. United States with $9.6 billion;
  2. Canada with $2.2 billion;
  3. Germany with $1.5 billion;
  4. United Kingdom with $1.4 billion;
  5. Brazil with $1.3 billion;
  6. The Netherlands with $1.1 billion;
  7. Belgium with $244 million; and
  8. Sweden with $639 million.

The U.S. is “a giant economy, and it continues to be a very dynamic economy and one that … has nurtured multiple fintech hotspots,” Wannemacher said. “Americans use a wide range of financial services, products and brands. Therefore, the ability for a new company to go in and test an idea is more viable in the U.S. than it is in almost any other country in the world.”

A surprising outlier in the group is Brazil, due more to its lack of traditional financial services and infrastructure rather than enhancements to a solid banking sector, Wannemacher said. “Brazil has firms like Nubank … that are building cool stuff that address the unmet needs of consumers and businesses,” he said. “Precisely because their financial ecosystems and infrastructure are weaker than the U.S. or Europe, or even a lot of parts of Asia.”

Wannemacher predicts the U.S. will continue its reign as the top destination for fintech funding but expects Brazil to continue ranking high.

“Brazil is a really big country, a big economy. But there is still lots of room for new ideas in Brazil, and new ideas that actually require someone to build it, because it hasn’t been built yet,” he added.