Table of contents

• Key takeaways
• Regulations
• Funding
• Product updates
• Partnerships
• M&As
• Focus areas
• Appendix

Key takeaways

• Regulations

  • Buy now, pay later (BNPL) providers to face similar regulatory scrutiny as credit card issuers: During the quarter, regulatory updates primarily targeted BNPL providers due to the increasing consumer adoption of such offerings. The US Consumer Financial Protection Bureau (CFPB) and the Australian Government introduced new laws tightening oversight to levels similar for credit card issuers. These regulations are expected to enhance consumer confidence in BNPL by ensuring better protection and further accelerating their adoption. Meanwhile, in the cryptocurrency and digital assets space, the US House of Representatives passed legislation governing digital assets and preventing CBDC issuance by the Federal Reserve without authorization.

• Funding

  • Overall funding volumes increased from a surge in mega deals: The FinTech sector experienced an increase in funding volumes in Q2 2024, marking three consecutive quarters of growth. The sector raised USD 6.2 billion, representing a 90% YoY and 18% QoQ increase. This was fueled by a higher count of mega deals completed during the quarter (20 compared with 9 in Q2 2023)—particularly within Neobanks, which accounted for six such deals—collectively raising nearly USD 4.6 billion (~74%) of the total funds raised during the quarter. Abound, a UK-based digital lender, raised the highest amount, totaling GBP 800 million (~USD 1 billion) in Series B equity and debt funding, with the funds earmarked to expand its lending portfolio and launch its AI-powered credit decision-making platform.

• Product updates

  • Integration of AI capabilities and diversification of business lines across industries: During Q2 2024, we counted 11 product updates (vs. 10 in Q1 2024) related to AI. These AI product launches were prominent in Business Expense Management, Capital Markets Tech, and InsurTech: Infrastructure, helping customers optimize and automate their operations and enhance their offerings. Incorporating AI across the value chain is becoming a key priority for FinTech companies, with investments in this area only expected to increase. Other product launches focused on complementing existing offerings, entering new markets, and diversifying operations, such as Mercury venturing into personal banking and pet insurer Kanguro entering the renters’ insurance market.

• Partnerships

  • Launching complementary products and enhancing existing product portfolios drove partnership activity: Partnership activity remained elevated during the quarter as FinTech companies aimed to innovate and enhance their product portfolios, facilitating entry into new markets. Meanwhile, AI-related collaborations were witnessed across industries, particularly within Neobanks, Capital Markets Tech, and InsurTech: Infrastructure. Incumbents, in particular, saw a surge in partnership activity, up 72% QoQ, accounting for over 50% of all activities. Mastercard stood out during this period, leveraging its infrastructure, including open-banking solutions, through partnerships with FinTech companies to introduce new products and extend market reach.

• M&A

  • Enhancing products and strengthening market presence were key motives for M&A deal-making: We counted 22 M&A transactions within the FinTech sector in Q2 2024 (vs. 15 in Q1 2024). Most were centered around enhancing existing product offerings and strengthening their market presence by acquiring companies that provide complementary services. The most valuable deal was AlphaSense’s acquisition of Tegus for USD 930 million; the integration of offerings sought to provide customers with improved insights into capital markets and strengthen AlphaSense’s position against industry giants like Bloomberg.

• Outlook

  • Adoption of AI and GenAI technologies is expected to continue, as companies seek to improve efficiencies and gain a competitive advantage: As GenAI applications continue to disrupt the market, the FinTech sector is poised for significant integration of this technology, including AI. Recent product launches and partnerships have heavily focused on enhancing the FinTech infrastructure layer. We anticipate that more FinTech companies will integrate these products into internal workflows and customer-facing operations to improve efficiency, enhance services, and better serve customers. Immediate applications of these technologies are expected to include developing chatbots to gain insights from proprietary and customer data and improve customer service. Companies are ramping up investments in these areas, as indicated by a survey where over 40% of financial service executives anticipate a more than 50% increase in GenAI investments.
  • Funding volumes to gradually recover in 2024: Funding volumes have increased consistently in Q1 and Q2 2024, and this momentum is expected to continue throughout 2024. This growth is driven by expectations of a 25-basis-point rate cut in 2024, which is anticipated to act as a catalyst for funding across the FinTech industry. Additionally, startups are expected to seek more funding to expand operations, as their cash reserves diminish following efforts to conserve funds. Focus on operating efficiency and profitability will also increase, as VC funding will likely favor companies that score high.
  • Startups to focus on IPO readiness: Following a sluggish 2023 for FinTech IPOs—characterized by reduced valuations—many startups and investors are now eyeing public listing, as market conditions improve, especially with the expected relaxation of monetary policy, which can have a tailwind effect on valuations. Companies such as eToro, Klarna, Monzo, WeBull, and Zilch have announced plans to go public within 12–24 months. Moreover, an increase in M&A activities within the sector is likely driven by investors seeking opportunities in distressed assets or companies looking to consolidate market share.

Regulatory updates: BNPL providers to face similar laws to credit card issuers

Analyst take: During the quarter, regulations have largely targeted BNPL providers, spurred by their growing consumer adoption of affordable payment options compared with credit cards, particularly in the current high-interest environment. The US Consumer Financial Protection Bureau (CFPB) and the Australian Government introduced new laws tightening oversight, treating BNPL providers akin to credit card issuers, and implementing comparable regulatory requirements. These regulations will likely enhance consumer confidence in BNPL offerings by ensuring better protection, potentially further accelerating their adoption.

Meanwhile, in the cryptocurrency and digital assets space, the US House of Representatives has passed legislation governing digital assets and preventing the Federal Reserve from issuing CBDC without authorization.

FinTech: Banking & Infrastructure

• Regulators tighten laws on BNPL providers to better protect customers. In May 2024, the CFPB issued an interpretive rule confirming that BNPL providers are equivalent to credit card providers and must comply with the "Truth in Lending Act." As a result, BNPL providers are now required to offer consumers key legal protections and rights similar to those of conventional credit cards, such as the right to dispute charges. Similarly, in June 2024, the Australian Government announced that it would introduce consumer protection laws on BNPL products and regulate BNPL providers as consumer credit. The regulatory changes aim to enforce the National Consumer Credit Act (Credit Act) on BNPL providers, ensuring they are overseen by the same consumer protections as other credit products like credit cards and loans.

• Several FinTech: Banking & Infrastructure vertical startups faced fines in Q2 2024
  • Neobank Chime was instructed by the CFPB to provide at least USD 1.3 million in redress to consumers it had harmed, along with a USD 3.25 million penalty into the CFPB’s victims’ relief fund. This action was a result of Chime's failure to give consumers timely refunds when their accounts were closed.
  • N26, a neobank headquartered in Germany, was fined EUR 9.2 million (~USD 9.9 million) by the Federal Financial Supervisory Authority (BaFin) in 2022, related to shortcomings in reporting suspicious activity.
  • The Federal and Trade Commission charged the former CEO and senior vice president of BlueSnap, a payment processing platform provider, with knowingly processing payments for deceptive and fraudulent companies. The defendants have agreed to a settlement of over USD 10 million for consumers and to abstain from processing payments for high-risk clients.

FinTech: Blockchain

• The House passed acts on governing digital assets and prevented CBDC issuance
  • In May 2024, the House passed H.R. 4763, the Financial Innovation and Technology for the 21st Century Act (FIT21), establishing clear and functional federal requirements over digital asset markets. The legislation grants the Commodity Futures Trading Commission (CFTC) new authority over digital commodities and clarifies the Securities and Exchange Commission’s (SEC) jurisdiction over digital assets in investment contracts. It also establishes a process for secondary market trading of digital commodities initially offered as investment contracts.
  • In the same month, the US House of Representatives passed H.R. 5403, the CBDC Anti-Surveillance State Act, which prevents the Federal Reserve from issuing a CBDC without explicit authorization from Congress.

Funding: Investment climate continues to improve, driven by surge in mega deals

Analyst take: The FinTech sector experienced increased funding volumes in Q2 2024, marking three consecutive quarters of growth. The sector raised USD 6.2 billion, representing a 90% YoY and 18% QoQ increase. This growth was driven mainly by a rise in mega deals (20 completed and valued at USD 100 million+), compared with nine in Q2 2023. Neobanks, in particular, saw significant activity, with six such deals. Abound, a UK-based digital lender, raised the most funds during the period, totaling GBP 800 million (~USD 1 billion) in Series B equity and debt funding. The FinTech investment climate over the past year appears to have favored companies that demonstrate efficiency and have an established market presence.

FinTech Q2 2024 funding summary

• In Q2 2024, companies across the FinTech sector raised USD 6.2 billion across 103 rounds. This marked a significant increase of 90% YoY compared with the same period in the previous year (USD 3.3 billion across 106 rounds) and an 18% increase QoQ compared with the USD 5.3 billion raised in Q1 2024. The YoY improvement was caused by a significant rise in funds raised across the Neobanks (up 322% YoY), Capital Markets Tech (up 170% YoY), BNPL (up 151% YoY), and Personal Lines (up 128% YoY) industries, partly offset by declines in FinTech Infrastructure (down 44% YoY) and Cryptocurrency, which did not record any funding rounds. 

• The FinTech: Banking & Infrastructure sector, which accounted for ~60% of all funds raised during the quarter, increased 125% YoY to USD 3.7 billion. It was followed by Wealth Tech & Sustainable Finance (a 15% share), which increased 104% YoY to USD 912 million, and InsurTech (a 12% share), which improved 105% YoY to USD 742 million. 

• In Q2 2024, the overall deal size also saw an increase to USD 60.3 million from USD 30.9 million in Q2 2023. This is primarily attributable to the higher funds raised and an increased number of mega deals during the quarter, particularly within FinTech: Banking & Infrastructure, where the average deal size improved to USD 101.7 million from USD 47.8 million. Additionally, Wealth Tech & Sustainable Finance also recorded a higher average deal size, rising to USD 91.2 million from USD 29.7 million. However, the FinTech: Blockchain industry saw a marginal decline in the average deal size, dropping to USD 14.0 million from USD 15.9 million.

• UK-based digital lender Abound raised the most funds during the quarter, totaling GBP 800 million (~USD 1 billion). This comprises an undisclosed mix of Series B equity and debt funding, with the funds earmarked to expand its prime lending portfolio in the UK and roll out its proprietary AI credit decision-making platform.

• Other notable funding rounds include AlphaSense, a market intelligence company that raised USD 650 million in Series F funding at a valuation of USD 4 billion, and Financeit, a Canadian BNPL provider that secured ~USD 365 million in debt financing.

• There were 20 mega deals in Q2 2024, with Neobanks accounting for six, followed by BNPL (5). Collectively, these rounds contributed nearly USD 4.6 billion (~74%) to the total funds raised during the quarter. In comparison, Q2 2023 only accounted for nine mega deals, collectively raising USD 1.4 billion and accounting for less than 50% of total funds raised during the quarter. Additionally, the number of mega deals improved compared with Q1 2024, which recorded 10.

Top 10 funding rounds across FinTech Services (Q2 2024)

Product updates: Integration of AI capabilities and product diversification witnessed across industries

Analyst take: A notable trend observed across companies in the FinTech sector during the quarter was the continued and rising adoption of AI and GenAI-powered products, particularly across Business Expense Management, Capital Markets Tech, and InsurTech: Infrastructure. AI adoption across the value chain appears to be a key focus for FinTech firms driven by its numerous applications and benefits and evolving customer expectations. In addition, companies also launched new offerings to complement existing offerings, enter new markets, and diversify their operations, such as Mercury venturing into personal banking and Kanguro offering renters insurance. Moreover, incumbent activity was also prominent during the period, especially across the Capital Market Tech industry.

FinTech: Banking and Infrastructure

• Neobanks targeted startups and entrepreneurs with new banking products
  • Brex launched new business accounts, including checking, treasury, and vault accounts. The checking account provides fee-free domestic transfers and international wires in over 40 currencies. The treasury account simplifies fund management and allows customers to earn interest, while the vault account safeguards capital across multiple FDIC-insured banks.
  • Grasshopper introduced a new online loan application feature that allows entrepreneurs to directly apply for Small Business Administration (SBA) loans, with eligibility getting pre-qualified in less than 10 minutes. The online application is part of Grasshopper's business checking account.

• Positive and negative product updates regarding cryptocurrency offerings by neobanks
  • In April 2024, Nubank announced that it will allow its customers to withdraw Bitcoin, Ethereum, and Solana cryptocurrencies through the Nubank wallet. It plans to add more tokens eventually. In contrast, Kroo, a UK-based digital bank, announced that it would no longer allow its users to transact cryptocurrency on its platform due to increased related frauds and scams.
  • In May 2024, Revolut launched its own crypto exchange, Revolut X. The exchange, which is available to professional cryptocurrency traders, offers lower fees to entice users to trade through it rather than buying and selling with the Revolut app.

• Mercury ventured into consumer banking to diversify business
  • In April 2024, Mercury launched Mercury Personal, expanding into the consumer banking market. Mercury Personnel will have an annual subscription fee of USD 240 and include features such as FDIC-insured high-yield savings accounts, no-fee domestic wires and ACH transfers, and customizable debit cards.

• Modulr launched a new travel payment solution
  • Modulr, a diversified FinTech infrastructure provider, unveiled a travel payment solution for online travel agents and travel industry intermediaries. This solution offers various features in many currencies, including virtual cards, account-to-account transfers, and customizable notifications, accessible through a single API integration and an online portal tailored to users' needs.

• BNPL providers rolled out new offerings providing more choice
  • Splitit launched FI-PayLater, allowing financial institutions like banks and card issuers to offer installment plans at the merchant checkout and tap into the BNPL market to generate incremental fees from their existing customers.
  • Affirm launched two new flexible payment options: "Pay in 2" and "Pay in 30." These options allow consumers to split purchases into two monthly interest-free payments or a full payment within 30 days. These additions complement Affirm's "Pay in 4" and monthly installment offerings.

• Apple ceased Apple Pay Later a year after its launch
  • In June 2024, Apple announced that it is winding down Apple Pay Later, its BNPL offering, just over a year after its launch. In its place, the company plans to introduce a new loan solution that will allow users to access installment loans from eligible credit and debit cards from partnering banks such as ANZ in Australia, CaixaBank in Spain, HSBC and Monzo in the UK, and Citi in the US later this year.

FinTech: Blockchain

• DeFi startups focused on wallet-related product updates
  • Coinbase unveiled a new Smart Wallet that enables users to create a free self-custody wallet to access DeFi services. The solution will feature passkeys such as Face ID, Google Chrome profiles, and fingerprints instead of the traditional recovery phrases, apps, and extensions usually required to access DeFi services. Users can also execute transactions using their Coinbase account balances or self-custodial wallet balances. In addition, the company added a dApp browser to its mobile wallet, allowing users to explore NFTs and decentralized apps related to DeFi, gaming, and social media.
  • Consensys launched a pooled staking feature for MetaMask users, its DeFi wallet solution. The solution will enable users to earn yields from staking any amount of their Ethereum (ETH) holdings, removing the previous 32 ETH minimum requirement.
  • Kraken, a US-based crypto exchange, has launched its own wallet, the “Kraken Wallet.” The new self-custodial wallet is accessible to Kraken users and non-users and will be open-sourced, allowing developers to access and contribute to its code. The wallet will initially support eight blockchains: Bitcoin, Ethereum, Solana, Optimism, Base, Arbitrum, Polygon, and Dogecoin.

FinTech: Payments

• AI integration remained key for Business Expense Management companies
  • PRG introduced Supplier Connect, an AI-enabled platform for accounts payable (AP). The platform converts manual processes into AI-driven workflows, resulting in faster dispute resolution, increased accuracy, and streamlined operations.
  • OpenEnvoy launched "Generative Analytics" so finance and business professionals can obtain critical operational and expense reports conversationally. This provides improved visibility into expenses and contracts, aiding users in streamlining finance processes.
  • Basware introduced AP Protect, an AI-based feature to protect businesses against financial losses from invoice errors and fraudulent activities. AP Protect uses over 800 algorithms and real-time monitoring to detect potential mistakes and fraudulent practices and prevent overpayments.
  • Medius launched two new products in June 2024: Medius Copilot for APA and Medius Supplier Conversations. Medius Copilot is an intelligent tool integrated into AP automation software, designed to aid invoice approvers by providing quick, accurate responses to invoice-related queries, ensuring fast and error-free approvals. Meanwhile, Medius Supplier Conversations is a chatbot designed to handle supplier inquiries by providing immediate and precise answers based on supplier history and payment terms.

• Airbase added vendor management and analytical capabilities to its platform
  • Airbase has added vendor management and spend analytics capabilities to its platform. These features are particularly directed toward mid-market and larger organizations, simplifying and automating spend oversight and approval processes. It also offers an in-depth view of company expenditures, vendor performance, and risk analysis.

• TranscendAP began new chapter as a separate entity
  • TranscendAP, a business unit formed by Optima Global Solutions in 2018, announced its spinoff and now operates independently. TranscendAP provides AI-powered AP automation solutions to medium- and large-scale enterprises.

• Visa launched a new personal biometric payment solution; SmartMetric unveiled a biometric credit card
  • Visa introduced the Visa Payment Passkey Service, which allows customers to authorize payments online by performing a biometric scan on their smartphone or computer. It also allows merchants to integrate the service into their checkout without building their own servers.
  • SmartMetric, a biometric smartcard provider, launched its biometric credit card. The card is integrated with a live fingerprint scanner, which can sense real fingerprints from fake foil fingerprints.

Wealth Tech & Sustainable Finance

• Capital Market Tech incumbents added AI capabilities to improve product offerings
  • S&P Global Market Intelligence unveiled new updates to its S&P Capital IQ Pro platform. These updates feature the inclusion of over 19.4 million fixed-income securities, complete with reference data, pricing, and analytics; the introduction of GenAI-powered capabilities for summarizing earnings transcripts; and enhanced data for private markets.
  • Nasdaq launched a new AI-powered feature within its Market Surveillance technology solution to enhance the quality, speed, and efficiency of market abuse investigations.

• Wealthfront’s latest offering allowed clients to invest in US treasuries
  • Wealthfront launched Automated Bond Ladder, a new offering that allows clients to invest in US treasuries. The product is a liquid, low-risk, and tax-efficient offering, allowing investors to automate investment in tax-exempt US Treasuries with a minimum investment of USD 500 and incremental deposits of USD 100.

InsurTech

• Insurers focused on product diversification and geographic expansion
  • Kanguro, a digital pet health insurance provider, entered the renters' insurance market, beginning with Texas. It is also actively seeking partnerships with insurance agencies and property managers to expand its coverage, particularly within the Latino community.
  • FloodFlash, a UK-based parametric flood insurance company, expanded its coverage to all mainland US locations. This was made possible by its binder expansion agreement with Munich Re Specialty – Global Markets Syndicate.
  • Kin Insurance, a digital homeowners insurance provider, expanded its coverage to Georgia, making it the company's ninth state. Its offerings are available in Alabama, Arizona, Florida, Mississippi, South Carolina, Virginia, and Texas. 
  • Wag!, an on-demand pet care services provider, unveiled a new insurance comparison platform called “WeCompare.com,” focusing on auto insurance. The company plans to expand into the home, travel, and life insurance segments.

• InsurTech Infrastructure bolstered offerings through AI integrations
  • Sapiens launched its next-generation Sapiens Insurance Platform, an AI-powered, open, integrated, cloud-native platform that supports end-to-end insurance processes across all business lines.
  • Qover rolled out a new AI-powered platform to improve and expedite the claims process. The platform offers AI-powered customer service via GenAI chatbots and processes claim information using optical character recognition (OCR) and AI technology.
  • Indemn released an AI-powered Agent Copilot, designed to improve the customer service experience for insurance agents, MGAs, and insurers during live chat conversations by providing response recommendations.
  • CLARA Analytics introduced CLARA Fraud for workers' compensation claims management. CLARA Fraud analyzes various factors such as servicing locations, claimants with multiple open claims, and attorney information.

Partnerships: Launching complementary products and enhancing existing product portfolio drive partnership activity

Analyst take: Similar to product updates, partnership initiatives focused primarily on complementing and enhancing a company's existing offerings and expanding reach. Additionally, AI-related partnerships were observed across various industries, along with increased activity among incumbents. Mastercard was the most active during the quarter, partnering with FinTech companies to leverage its infrastructure, such as open-banking solutions to develop new products and expand into new markets.

FinTech: Banking and Infrastructure

• We observed 37 partnerships within FinTech: Banking & Infrastructure, with incumbents accounting for nearly 54%. The most activity was recorded in the FinTech Infrastructure industry (24), followed by Neobanks and BNPL, each recording five activities.

• Within FinTech Infrastructure, Mastercard and Visa were the most active, providing their open banking and infrastructure solutions to startups and established financial service companies to launch new products and improve existing operations, such as cross-border payments.

• Mastercard partnered with Checkout.com, a payment infrastructure provider, to offer virtual cards for online travel agents and other travel businesses. Additionally, it partnered with VoPay to provide efficient and secure domestic and cross-border money movement solutions for individuals and businesses in Canada. In a similar collaboration, Mastercard and Verituity integrated Mastercard Move into Verituity’s payment platform for real-time domestic and cross-border payments.

• Notable partnerships for Visa included collaborating with JP Morgan Payments to enhance merchant payout experiences by introducing faster domestic payments in the US through the Visa Direct network. It also partnered with Dwolla to improve the account verification capabilities of Dwolla's A2A offering.

• Other partnerships in FinTech Infrastructure included TerraPay partnering with Thredd, a card-issuing platform, to power its virtual card payments solution for the travel industry, and PPRO collaborating with Lunar and Swish to enhance payment capabilities in Sweden.

• Key partnerships within Neobanks involve Bunq partnering with Mastercard to use the latter’s open banking platform for personal financial management using AI and NVIDIA to improve fraud detection through accelerated AI computing.

• In addition, OakNorth launched a new commercial card for SMEs with Marqeta, while Rho developed a co-branded finance management tool for businesses with Navan.

• Across BNPL, notable partnerships include Zilch expanding its partnership with Amazon Web Services (AWS) to enhance its platform's AI and ML capabilities and Affirm partnering with Apple to offer Apple Pay users flexible payment options through Affirm at checkouts.

• Notable partnerships in the P2P Financial Platforms space featured Currencycloud and Paysend partnering to help Paysend expand its FX and treasury services across the US, EMEA, and Asia-Pacific, and TransferGo integrating Tink’s Pay by Bank to its payments platform to enable international fund transfers.

FinTech: Blockchain

• Partnership activities within the FinTech: Blockchain sector were focused mostly on launching new cryptocurrency-related products. We observed 18 partnerships in Q2 2024, with 12 and six for DeFi and Cryptocurrency, respectively.

• Across DeFi, notable partnerships included Aptos Labs partnering with Microsoft, SK Telecom, and Brevan Howard (a fund management company) to launch a new DeFi platform named “Aptos Ascend.” In addition, Velar collaborated with Bitlayer to launch Velar Artha, a Bitcoin-based perpetual decentralized exchange (Perp DEX).

• Furthermore, Mastercard and Unbanked, a provider of white-label crypto card issuance and program management services for Web3 companies, collaborated to issue and accelerate DeFi card issuances in Europe.

• Within Cryptocurrency, MoonPay and BitPay partnered to simplify how users transfer cryptocurrencies to their bank accounts and debit cards and conduct sales. Moreover, a notable partnership involved Tether and Chainalysis developing a customizable solution to monitor secondary market activity.

FinTech: Payments

• We witnessed 21 partnerships in the FinTech: Payments sector, with Business Expense Management accounting for 15, Biometric Payments contributing five, and Digital Wallets with one.

• In Business Expense Management, a noteworthy trend emerged, as startups formed partnerships to automate processes. AvidXchange partnered with M3 Accounting Solutions to deliver an automated financial management solution to hotels using M3 products, while Paymerang collaborated with Harris ERP to provide advanced invoice and payment automation solutions to local governments.

• In addition, AppZen partnered with finance and spend management consultancy Lyndon Group to use AppZen's Expense Audit solution across North America to provide advanced consulting and tech solutions for clients looking to improve their expense audit processes.

• Within Biometric Payments, OVE partnered with Fingerprint Cards (FPC) to launch a prototype of Touch and Go, a fingerprint sensor used for biometric retail payments. In addition, Mastercard collaborated with PayEye and Planet Pay to launch Pay by Your Glance, a biometric checkout technology, enabling users to authenticate payments using facial recognition at Empik retail stores in Poland.

• Across Digital Wallets, notable partnerships included Visa and Skipify teaming to combine Visa’s extensive digital payments expertise with the Skipify Connected Wallet to improve the wallet’s capabilities and reach.

Wealth Tech & Sustainable Finance

• There were 13 partnerships during Q2 2024 within the Wealth Tech and Sustainable Finance sector, with Capital Markets Tech accounting for seven and Retail Trading Infrastructure and Financial Wellness Tools accounting for three each.

• In Capital Markets Tech, Wipro and Microsoft partnered to launch a suite of cognitive GenAI assistants for financial services industries. This includes Wipro GenAI Investor Onboarding, designed to provide financial professionals with market intelligence and relevant information on investment products and investor behavior to accelerate the onboarding process.

• Other notable partnerships in Capital Markets Tech focused on providing more investing opportunities to investors. SoFi and Templum teamed up to give everyday investors access to alternative assets, while WealthKernel collaborated with Fint Invest to cater to young investors by offering them modern portfolios aligned to their areas of interest, such as climate change, disruptive technology, and esports.

• Within the Retail Trading Infrastructure industry, notable activities included Moomoo partnering with Nasdaq to offer an enhanced trading experience for retail investors using its platform by giving access to Nasdaq TotalView, a premium data feed subscription.

• In Financial Wellness Tools, partnerships centered around expanding product reach. Kashable collaborated with BrightDime to offer free personalized financial coaching and money management tools to expand product reach across the US. In addition, Clair partnered with Check, a payroll infrastructure provider, to integrate Clair's on-demand wage access solution with Check and expand its product reach.

InsurTech

• We observed 18 partnerships within InsurTech, with Infrastructure accounting for the majority of partnerships (8), followed by Personal Lines (6) and Commercial Lines (4). Moreover, incumbents were responsible for ~75% of all recorded partnerships.

• In Infrastructure, partnerships were predominantly forged to improve underwriting and claims processing platforms. Notable activities include Munich Re Life US partnering with Clareto, a digital health data company, to develop the Automated EHR Summarizer, a digital solution for interpreting electronic health records for life and health underwriting. Additionally, Swiss Re extended its partnership with Appian to launch the jointly built Connected Underwriting Life Workbench platform in select countries across the Asia-Pacific and EMEA regions.

• Within Personal Lines, Lemonade was the most active, having partnered with BNP Paribas Cardif to launch homeowners insurance in France and with Homesite Insurance to expand its home insurance to several new states.

• In Commercial InsurTech, notable partnerships included Flock, a London-based digital fleet insurance provider, partnering with Admiral Pioneer, Admiral Group's venture-building business, to expand its fleet insurance offering.

M&As: Uptick in M&A activity, as companies aim to enhance product offerings

Analyst Take: M&A activities during Q2 primarily aimed to enhance existing offerings (i.e., integrating data analytics capabilities) and diversify businesses by providing a more comprehensive product suite. Along with these reasons, companies sought to strengthen their market presence and expand services to new geographies, leveraging the acquirees’ established business. 

The most valuable deal during the quarter was AlphaSense’s USD 930 million acquisition of Tegus, where the former sought to integrate its offerings to provide improved insights into capital markets and strengthen its position against industry giants like Bloomberg.

FinTech: Banking and Infrastructure

• Nubank enhanced data analytics through acquisition; other neobanks diversified operations through M&As
  • In June 2024, Nubank acquired Hyperplane, a Silicon Valley-based data intelligence company building foundation models for banks, for an undisclosed sum. It planned to utilize Hyperplane's AI and data analytics capabilities to train and develop deep-learning models on first-party data to generate insights and enhance its decision-making processes.
  • In the same month, Chime purchased enterprise employee rewards company Salt Labs for an undisclosed sum. After that, it will launch a new division called “Chime Enterprise,” which will include Salt's products and focus on expansion through employer channels. This move will grant Chime an additional revenue stream and access to Salt’s enterprise clients to promote Chime MyPay, its earned wage access platform.
  • Chetwood Financial, a UK-based neobank, acquired CHL Mortgages, a buy-to-let mortgage specialist. Chetwood aimed to benefit from CHL's lending team to support its buy-to-let platform, ModaMortgages. Following the acquisition, the two lending institutions will continue operating independently, preserving their brands, products, and teams.

• TabaPay acquired assets of Synapse after the latter’s voluntary bankruptcy filing
  • TabaPay, an instant money transfer platform, acquired the assets and affiliates of Synapse, a banking-as-a-service (BaaS) infrastructure provider, for an undisclosed sum, following Synapse’s filing of a voluntary bankruptcy petition under Chapter 11. Through this acquisition, TabaPay will leverage Synapse’s assets and technologies to broaden its financial services offerings.

• Klarna sold Klarna Checkout to eliminate conflicts with distribution partners
  • In June 2024, BNPL provider Klarna sold its online checkout solution, Klarna Checkout (KCO), to a group of investors led by Kamjar Hajabdolahi (CEO of BLQ Invest) for USD 520 million. Through the divestment, Klarna aimed to eliminate conflicts from offering its payment methods directly to merchants via KCO and distribution partners like Adyen and Stripe.

FinTech: Blockchain

• Robinhood acquired Bitstamp for USD 200 million to expand its crypto services globally
  • In June 2024, Robinhood acquired London-based Bitstamp, a cryptocurrency exchange, for USD 200 million to leverage Bitstamp’s network of institutional clients across the EU, UK, US, and Asia to expand its crypto offerings globally.

FinTech: Payments

• Business Expense Management startups bolstered offerings through M&As
  • In April 2024, Spendesk acquired Okko, a French procurement company, to integrate the latter’s technology to offer a fully integrated procurement and spend management platform for mid-sized European businesses.
  • Furthermore, in May 2024, Basware acquired AP Matching, a UK-based cloud solution provider for managing invoices and reconciling statements, for an undisclosed sum. Following the acquisition, AP Matching’s solutions will be integrated with Basware to offer an automated statement reconciliation feature to reduce payment errors and improve financial data.

Wealth Tech & Sustainable Finance

• AlphaSense acquired rival Tegus in a deal worth USD 930 million
  • In June 2024, market intelligence platform AlphaSense agreed to acquire Tegus, a corporate intelligence solutions provider, for USD 930 million. The acquisition, set to close in Q3 2024, includes Tegus' research platform, financial data, and workflow tools. Tegus' vast database integrated into AlphaSense's AI and search capabilities will strengthen AlphaSense's position against industry giants like Bloomberg and FactSet and offer users seamless extraction of proprietary insights.

• Betterment acquired digital investment accounts from Marcus Invest
  • Betterment, a hybrid robo-advisory platform, agreed to acquire Marcus Invest's digital investing accounts from Goldman Sachs after news emerged that Goldman Sachs was restructuring Marcus, its digital consumer banking and robo-advisory unit.

InsurTech

• Chubb to expand its presence in the pet insurance market through Healthy Paws acquisition
  • In April 2024, Chubb agreed to acquire Healthy Paws, a pet insurance provider, from Aon plc, for an undisclosed sum. Through the acquisition, Chubb aimed to leverage Healthy Paws' established brand and customer base to expand within the pet insurance market.

• Other InsurTech M&As focused on enhancing in-house offerings
  • Intuit signed an agreement to acquire certain technology and assets from Zendrive, a provider of mobility risk intelligence, to accelerate the growth of Credit Karma’s Karma Drive program, a usage-based insurance offering.
  • Furthermore, Neptune Flood, a digital flood insurance provider for homeowners and businesses, acquired Charles River Data, a data science consulting group, to improve its analytical capabilities and enhance its Triton underwriting platform.

Focus areas: Product launches surge within the Payments vertical, along with Banking and Lending infrastructure partnerships

Analyst Take: The FinTech landscape saw significant product updates in the Banking, Lending, and Payments verticals during Q2 2024, with a notable surge in AI-related offerings from Business Expense Management companies. Subsequently, product updates in Banking and Lending slightly decreased from Q1, primarily due to fewer Neobank launches. Infrastructure partnerships flourished within the Banking and Lending vertical, with industry giants like Mastercard and Visa intensifying their involvement and offering their open banking and infrastructure services to other FinTech companies.

Notes: 1) Comprises data from all hubs in scope under the FinTech vertical; 2) darker colors indicate greater intensity; 3) arrows indicate the movement of activity compared with the previous quarter

Appendix

Startups that raised funding for the first time in Q2 2024