State of FinTech

Q4 2022
Quarterly update Q4 2022

FEBRUARY 2023
FinTechs are encouraged to focus on sustainable business
models as 2022 shifts to an environment of scarcity
Adverse macroeconomic climate continues impacting private company funding flows into the
1 StartUp and FinTech/InsurTech ecosystem. Q4'22 saw funding fall for the 4th consecutive
quarter, accompanied by a decrease in mega-deals (>$100M)
Q4'22 FinTech equity funding falls
for the 4th consecutive quarter, 2022 saw the time between funding rounds increase at the sharpest rate since 2008, with the
as investor shift focus onto 2 impact felt more acutely at later-stages. Investors are encouraging a shift in focus to strong
unit economics, extending cash runway and focusing on new opportunities
tighter unit economics and
increasing cash runway Public market FinTechs prices have fallen sharply over 2022, with some stabilization in Q4'22.
3 Public market FinTechs have performed notably less well than the tech giants that make up
the NADSAQ-100

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However, investment is far from drying up completely. 2022 full year levels surpass all prior
4 years bar 2021. 2022 investments 58% higher than 2020 full year levels, with an increase
across all product segments
However, global FinTech
investment surpasses all years The long-term viability of the FinTech/InsurTech ecosystem remains promising. ~78% of new
apart from 2021, with early-stage 5 deals in 2022 were early stage (Seed-Series A) and long-term trends saw investment increase
deals remaining particularly in certain clusters. A changing macroeconomic environment also presents new opportunities
competitive
An opportunity for consolidation presents itself. Q4'22 saw a flurry of M&A activity as leading
6 FinTechs acquired smaller FinTechs to bolster their offering and FIs acquires smaller FinTechs
to boost their technical capabilities and improve existing products
2
1.1 Q4 2022 funding overview Entire Startup Ecosystem

2022 has seen a downturn in funding for the private market startup ecosystem
globally. FinTech funding in Q4'22 saw the lowest investment level since Q1'19

Global Startup Ecosystem - Equity funding ($B) and count of deals (K)
10.3 10.0 10.8
9.4 2021 saw anomalous levels of equity
8.5 8.9 8.7 investment into the private market,
7.5 7.3 7.5 7.0 7.2 7.6 7.2 increasing quarter on quarter from
6.7 6.5 -64% Q2'20 to a peak of $180.7B in Q4'21
180.7
165.9 2022 funding has fallen from these
155.5 150.4 great heights. Investment has fallen
136.4 quarter on quarter across 2022
117.4 -19%

95.5

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80%
75% 78%
81.5 78% 81.4 This trend has been seen across the
69.0 66.4 65.6 79%
65.9
58.2 60.9 59.7 80% global startup ecosystem
85%
83% 84%
86% 82% 78% 76% 83% 81% 84% In Q4'22 FinTechs raised $10.5B over
21% 25% 22% 20% 22% 626 rounds, a 21% decrease on
22% 24% 17% 15% 20% 16%
14% 18% 17% 19% 16% Q3'22. Q4'22 saw the lowest levels
of investment into FinTech since
Q1’19

Q2’19

Q3’19

Q4’19

Q1’20

Q2’20

Q3’20

Q4’20

Q1’21

Q2’21

Q3’21

Q4’21

Q1’22

Q2’22

Q3’22

Q4’22
Q1'19 ($9.6B)

Global number
Global equity funding - all other industries ($B) Global equity funding - FinTech ($B)
of equity deals

Note: Analysis includes equity funding for firms active at time of raise and does not include Debt, M&A or IPO funding
Source: BCG FinTech Control Tower, CB Insights 2022 State of Venture Report, global 3
1.2 Q4 2022 funding overview FinTech/InsurTech Ecosystem

The drop in FinTech funding has predominantly been driven by a pull back in
mega-deals1. Q4'22 sees the lowest mega-deal equity financing since Q1'19
Total funding and number of mega rounds monthly evolution (2021-Dec '22)
42
39
31 30 32 30
33 32 34
31 33
Q4'22
-71%
26 27 25 Funding growth
16.2 24
21
16 compared to
14 14 13
7
Oct-Dec 2021
13.0 25% 13.2 4 6
12.6 3
12.2
11.4
9.6
30% 29%
11.3 11.4
30%
11.4 11.4 11.3
~39%
38% 9.6
32% 36% 31% 8.8 Weight of
8.5 8.2 38% 44%
50% 7.5 7.5 mega-rounds in
38%
31% 35% 44% 5.749% Oct-Dec 2021

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75% 3.0 3.2
51% 46%
4.6 4.5
62%
70% 71%
68% 70%
64% 62% 56% 69%
41% 85%
15%
73%
27% 2.8 -75%
69% 65% 62% 50% 69% 58% Number of
51% 56% 53%
49% 54% 59% Mega-deals
31% 42% 47% compared to
1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 Oct-Dec 2021
2021 2022
Non-Mega Deals Mega Deals # of Megadeals

1. Mega-deals are individual funding rounds greater than or equal to $100M

2. 2022 figures not completed at 100% and are subject of data variations, specially on number of deals
Note: Analysis includes equity funding for firms active at time of raise and does not include Debt, M&A or IPO funding
Source: BCG FinTech Control Tower 4
2.1 FinTech & InsurTech 2022 time between funding rounds

As well as lower investment levels, '22 saw a sharp rise in time between rounds,
most notably at later-stages. Further prompting FinTechs to extend cash runway

Average time between equity financing rounds, by maturity (days)

1,000
2022 saw a +9% increase in the
900
+15% number of days between rounds
800 compared to 2021

700 Later-stages saw a notably larger

increase (+15%). Extending the
600 +13% time between rounds to periods

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500 seen pre-pandemic as investors
became much more cautions with
400 big ticket investments in 2022
+6%
300 compared to 2021

200 Early-stage and Mid-stage rounds

2016 2017 2018 2019 2020 2021 2022 also saw a lengthening of time
but less severe (+6%, +13%)
Early-Stage Mid-Stage Late-Stage returning to 2020 levels

Early-Stage – Seed/Angel & Series A, Mid-Stage – Series B, Series C & Series D, Late-Stage – Series E+ & Private/Growth Equity 5
Source: BCG FinTech Control Tower
2.2 VCs encourage startups to change strategy
"The ethos of the “hyper growth” era was
misguided, distracting and not the way company
Growth at all costs is over. building was ever meant to be. Now’s the time to
Focus on well defined unit solidify the intrinsics, and get in a position to
economics with a clear path profitably explode at a pace you can sustain."
to profitability

" 2022 is pacing to look a lot like 2001 dot com

VCs are crash. We're moving from an environment of
encouraging Remove reliance on
abundance to one of scarcity. […] We'd
encourage you to think about at least 36 months
FinTechs & equity investment, build of runway."
a longer cash runway
InsurTechs to
focus on a path to

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profitability and "Market turmoil typically sees people pull back
build longer cash and become more risk averse, but we’ve always
perceived that such times can be a great
runway, but early- moment to launch a startup. We don’t think
Early-stage companies
stage companies have an opportunity to
early-stage companies are immune from a
broader market pullback, but we believe the
remain attractive find their niche in this impact is less for seed and pre-seed."
new environment

Source: BCG FinTech Control Tower, Accel, Sequoia, 500 Global 6

3 FinTech & InsurTech Q3 2022 funding overview

Public FinTechs have fallen from their peak valuation in late 2021, performing
worse than the rest of the technology sector. Q4'22 sees a relative stabilization

Returns of the FINX Global FinTech Index and NASDAQ-100 since Jan '20
By indexing the NASDAQ-100 and FINX
100 Global FinTech Index to Jan '20 we see
Global FinTech ETF (FINX)
returns matching up to the end of 2021
Indexed, Jan ’20 = 0
NASDAQ-100 Technology Sector
75 Across 2022, public FinTech performance
Indexed, Jan’20 = 0
fell consistently. Performing worse than
the tech giants which make up the
50 NASDAQ-100

2022 sees an increase in the spread

Copyright © 2023 by Boston Consulting Group. All rights reserved.

25 between the two indices with a
stabilization towards the end of the year
0

-25 FINX
+60 other FinTechs
-50
01/01/2020 01/07/2020 01/01/2021 01/07/2021 01/01/2022 01/07/2022 30/12/2022

Source: BCG FinTech Control Tower, Global X FINX, NASDAQ-100 7

4 2022 full year FinTech/InsurTech funding

Annual FinTech Equity Financing ($B) -43%

2022 received the 2nd
139.1
largest amount of funding
14.7
on record, despite
27.1 investments decreasing
~30% each quarter
21.1 79.9
7.3
2021 was a year of abundance,
56.7 26.8 16.7 +58% 2022 has been one of relative
5.1 50.1 50.6
4.9 6.7 8.2
12.4 scarcity. As we move into 2023
9.0 5.7 funding will likely remain scarce

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30.1 6.8 20.7 13.5
27.8 5.6 6.1
3.0 1.8 3.4
3.1 12.0 7.9
8.5 but the long-term health of the
4.7 4.9 7.9 14.4
2.0 3.1 13.6 8.5 28.7
FinTech ecosystem is expected to
7.6 9.4 20.0
8.7 6.2 10.2 10.8 15.6 remain as established companies
focus on building sustainable unit
2016 2017 2018 2019 2020 2021 2022
economics and new business
Insurance Financial Infra. Lending models enter the market
Trading & Invs. Accounts Payments

Source: BCG FinTech Control Tower 8

5.1 The long-term viability of the FinTech ecosystem looks promising
Insurance, Payments and
After 2021's record year, all product segments experienced Trading & Invst. register the
decreased investment across 2022, Q4 continues the trend largest funding decline in
Q4'22 against Q4'21. Funding in
Insurance drops a significant
~81% YoY as number with 0
mega-deals recorded

Payments and Trading &

Investments clusters fall ~73%
compared to Q4'21

Financial Infra., Lending &

Accounts too have experienced
a downward trend in funding.
Despite a 61% drop, Accounts

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received the highest funding of
$2.4B whilst Fin. Infra. saw
relatively high mega-deal
weighting (45%)

Lending sees the 2nd highest

number of deals and
investment levels remain
relatively high considering only
2 were mega-deals
1. Q42022 figures not completed at 100% and are subject of data variations, especially on number of deals. 2. Weight
of mega-deals based on funding over total investment. Note: Funding excludes Ant Financial, Du Xiaoman Financial, and JD digit funding rounds. 9
Equity funding deals exclude M&A and IPOs
Source: BCG FinTech Control Tower.
5.2 The long-term viability of the FinTech/InsurTech ecosystem looks promising Core Trading Tech
• Increased public market volatility seen across
Underlying trends drove growth in winning clusters 2022 sparked a rise in demand for solutions
FinTech equity funding by sub-cluster 2022 vs 2021* which help capital market players and wealth
managers to build and implement technology
Trading & Investments Lending & Crowdfunding Accounts tools, alternative data and analytics solutions

Credit Score management

• Investment increased into solutions for retail
banking clients monitor and improve their credit
score online or via app. Esusu raised $130M
helping renters boost their credit score by
reporting rent payments to major credit beuraus

Alternative Assets
• Saw increased demand as stock market volatility
encouraged users to diversify their savings and
investments. These platforms enable retail
banking clients to invest in assets such as
Payments property, precious metals & cryptocurrencies

Financial Infrastructure Insurance

Portfolio Management & Modelling

Copyright © 2023 by Expand Research. All rights reserved.

• Increased investor interest in AI tools combining
investment strategy discovery, portfolio analytics
and automated reporting. Enabling capital
markets players and wealth managers to
minimize portfolio risk

Regulatory Reporting & Risk Management

• Analytics and alternative data sources for FIs to
automate regulatory reporting and risk
management. Ecovadis raised $500m to scale
*Size represents total funding in 2022 their sustainability rating & reporting platform
Investment increase, '21-'22 Investment decrease, '21-'22
Source: BCG FinTech Control Tower 10
6 Current conditions presents an opportunity for M&A

M&A deal activity continued strongly in Q4'22 with declining FinTech valuations
and flat IPO & SPAC exits presenting an opportunity for consolidation Examples
The acquisition will With Kantox on As part of Safe Cinven will The acquisition of The transaction is The transaction will Binance aims to Enables Shift4 to
help micro- board, clients of BNP Harbor, Abaca will incorporate TaxAct, a Benefitfocus expected to leverage Thoma return crypto to offer e-commerce
enterprises (in semi- Paribas will now be able to tax preparation accelerates Voya’s deliver revenue Bravo's expertise to Voyager’s customers merchants in U.S.
urban and rural have a unique accelerate their software business strategy in health diversification and accelerate growth in kind, in and Europe online
India) access formal platform to ability to develop with Drake Software, and wealth synergies to Bakkt initiatives in accordance with checkout via easy
source of credit and automate their and launch new another portfolio products, to deliver as it scales its Coupa's franchise in court-approved integration
be a driver for currency risk financial products company in the same innovative solutions offerings Business Spend disbursements and capability and
broad-based growth management for clients in the industry for employers and Management space platform capabilities means to process
cannabis business health plans payments in Europe

Warburg Pincus Safe Harbor Voya will acquire Thoma Bravo Binance.US to Shift4 acquires
BNP Paribas Cinven acquires Bakkt will
acquires Vistaar Financial shares of acquires Coupa acquire bankrupt SecurionPay for
acquires Kantox TaxAct for acquire Apex
Finance acquires Abaca Benefitfocus for $8B Voyager’s assets $125.9M
for around $130M $720M Crypto for $200M
for $150M for $30M valued at $570M for $1.02B

October 2022 November 2022 December 2022

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Pollen
Pollen Street
Street Societe Generale MangoPay Opn Enters US Tecnotree V Ventures
Capital
Capital Tyler Technologies acquiresa amajority
Acquires major Equals Group to Schufa acquires
acquires Rapid Acquires Nethone Payments Market acquires acquires
acquires
acquires PAIR
PAIR stake in PayXpert acquire Roqqett Bonify (terms
Financial Solutions (terms not with $400M CognitiveScale Zipmex for
Finance
Finance (terms not for up to £2.25M not disclosed)
for
for $194M
$194M for $68M disclosed) disclosed) MerchantE Deal for $0.6M $100M

Pollen Street Capital Enables Tyler to Societe Generale MangoPay will allow Equals Group will Opn’s global This acquisition will Zipmex plans to This acquisition will
will acquires a offer their public will broaden its platforms to gain access to two footprint would now accelerate use cryptocurrency help in accelerating
majority stake in sector clients a offering for retail operate in a safe previously unheld span to seven Tecnotree’s goal of assets received transformation of
PAIR Finance, AI proven and trusted and online environment by licenses, Roqqett's countries, including AI-Powered 5G from transaction SCHUFA and
based digital payments platform merchants in reducing fake AISP (Account the U.S., the largest monetization globally to unlock frozen improve the quality
collections platform, which makes Europe accounts, fraud Information Service growing market for and establish them as customer accounts and service of
to help them expand disbursing payments rates, chargebacks Provider) and PISP embedded finance digital service on the exchange offerings for private
into new easy, quick, and etc. (Payment Initiation solutions providers in North by April 2023 individuals
geographies secure Service Provider) American market
certifications
Source: Company's web site; Press research; BCG FinTech Control Tower 11
bcg.com