Key takeaways

• Regulations

  • SPAA Scheme gained traction; cryptocurrencies subject to sanction violations in the EU: The SEPA Payment Account Access Scheme (SPAA) saw notable progress in Europe, with numerous FinTech Infrastructure startups, such as TrueLayer and Token, aligning with it. The scheme aims to foster an open and competitive European payment system. Moreover, the EU introduced new regulations targeting sanction violations, particularly concerning cryptocurrencies, with potential asset freezing for non-compliance.

• Funding

  • Coinbase’s debt financing round stood out, but overall funding fell again: The FinTech sector saw total funding decline 59% YoY to USD 4.3 billion in Q1 2024 (vs. USD 10.5 billion in Q1 2023). The sector witnessed 10 mega deals (USD 100 million+) similar to Q1 2023, collectively raising more than USD 2.9 billion (~67% of total) with the Neobanks, BNPL, and the Financial Wellness Tools industries accounting for two deals each. The Cryptocurrency industry emerged as the highest-funded industry, primarily due to Coinbase’s massive debt financing round of USD 1.1 billion, with the funds earmarked for paying off its existing debt and cost of capped call transactions as well as for general corporate purposes.

• Product updates

  • Continued adoption of AI-powered products and expansion into new business lines witnessed across multiple industries: During Q1 2024, we counted 10 product launches (nine in Q4 2023) related to AI. These AI launches were particularly notable within the Business Expense Management and Insurance industries, as companies look to incorporate these technologies to automate processes and enhance their offerings. Moreover, other product launches by startups were mainly geared toward complementing existing offerings and expanding into new territories.  Another prominent trend observed throughout the quarter across several industries was startups announcing a significant shift in their strategy and operations, exiting legacy businesses to focus on other business lines. For example, Oxygen terminated its banking activities to focus on health insurance and Zwipe exited the biometric payment industry to focus on biometric access control.

• Partnerships

  • Activities centered around enhancing existing product portfolio and value additions: Most partnership activities within FinTech during the quarter were aimed at forging alliances to develop and/or add new features to complement existing offerings as well as expand market reach. In addition, there was a rising number of partnerships in the InsurTech sector between insurers and infrastructure providers targeted at developing and enhancing underwriting and claims processing capabilities.

• M&A

  • Diversification and acquisition of licenses drove M&A activity: We counted 16 M&A transactions within the FinTech sector in Q1 2024. Most centered around diversifying businesses and enhancing existing product offerings. In addition, within the FinTech: Blockchain sector, companies resorted to M&As as an alternative strategy to quickly obtain licenses to expand offerings and market presence. A promising development this quarter was Virgin Money receiving an all-cash takeover offer worth USD 3.7 billion from Nationwide Building Society. The transaction is pending approval from shareholders.

• Outlook

  • Adoption of AI and GenAI technologies is imperative for organizations to 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. Companies are strategically incorporating these technologies to gain insights from data and to automate and enhance processes to gain a competitive advantage. The first quarter saw a prominent increase in the adoption of AI within InsurTech, as insurers aimed to improve their underwriting and pricing capabilities. We expect the integration of GenAI technologies (such as chatbots) to increase within the FinTech sector for customer service support as well as to assist employees with internal workflows.
  • Funding volumes to gradually recover in 2024: The US inflation rate was recorded at 3.2% for the 12 months ending February 2024 according to the Consumer Price Index, compared with an annualized target of 2%. Analysts are expecting rate cuts of around 70 basis points this year beginning from mid-year. The potential easing of monetary policy is expected to act as a catalyst for funding across FinTech industries, with VC funding likely to favor companies that demonstrate greater efficiency and profitability. Moreover, the tight funding environment over the past year is also expected to lead to startups raising cash later this year, as their cash runways begin to diminish after their efforts to conserve cash. 
  • IPOs to make a return, as investors seek exit strategy: After a subdued 2023 market for FinTech IPOs, marked by valuation markdowns, many startups and investors are now looking forward to going public, as market conditions turn favorable. Several startups, including eToro, Klarna, Monzo, WeBull, and Zilch, have announced plans to list in the next 12–24 months.

Regulatory updates: Cryptocurrencies face regulations on sanction violations in the EU

Analyst take: We didn’t report any significant regulatory developments in the FinTech sector this quarter. However, the period witnessed notable progress for the SPAA Scheme in Europe, with numerous FinTech Infrastructure startups aligning with it. Furthermore, the EU introduced new regulations targeting sanction violations, particularly concerning cryptocurrencies, with potential asset freezing for non-compliance.

FinTech: Banking & Infrastructure

• The SPAA Scheme gained traction during the quarter. Launched in November 2023, the SPAA, established by the European Payments Council (EPC), comprises rules and standards facilitating the exchange of payment account information between asset holders (e.g., banks) and asset brokers (e.g., third-party providers). The SPAA Scheme, voluntary in nature, promotes an open and competitive European payments system. During the quarter, TrueLayer, Token, and Tink joined the SPAA Scheme to monetize their open banking APIs and encourage collaboration between banks and FinTechs.

• Several startups within the FinTech: Banking & Infrastructure vertical faced fines in Q1 2024.
  • In February 2024, the California Department of Financial Protection and Innovation (DFPI) announced that it had reached a consent agreement with neobank Chime regarding the investigation into the accuracy and responsiveness of Chime's customer service transactions. As part of the settlement, Chime will pay a USD 2.5 million penalty.
  • In March 2024, Sweden-based BNPL provider Klarna was fined ~733,300 (SEK 7.5 million) by a Swedish court of appeal for violating the EU's General Data Protection Regulation (GDPR) for failing to provide sufficient information to users about the storage and handling of their personal data.
  • In March 2024, M1 Finance, an automated investment platform, was fined USD 850,000 by FINRA for social media posts made by influencers on behalf of the firm that were not fair or balanced and contained misleading claims, violating FINRA Rules 2210 (Communications with the Public) and 2010 (Standards of Commercial Honor and Principles of Trade).

FinTech: Blockchain

• In March 2024, the European Parliament passed a new set of rules to crack down on sanctions violations, notably including those involving cryptocurrencies. These rules will also be extended to cryptocurrency service providers, which could see their assets frozen in the case of non-compliance. These need to be passed by the European Council before they are enacted into law.

• The quarter also saw a verdict handed down on Sam Bankman-Fried, the founder and former CEO of FTX, related to the misuse of investor funds and the collapse of FTX and its sister company, Alameda Research (a hedge fund), in late 2022. He was sentenced to 25 years in prison, given three years of supervised release, and ordered to pay USD 11 billion in forfeiture for his orchestration of multiple fraudulent schemes.

• Meanwhile, the sentencing of Changpeng Zhao, former CEO of Binance, was postponed to April 30, 2024, after he pleaded guilty to money laundering charges in late 2023. He is currently free on a USD 175 million release bond in the US.

Funding: Overall funding volumes continue to decline; Coinbase stands out with USD 1.1 billion debt finance

Analyst take: Funds raised across the FinTech sector declined YoY during Q1 2023. This was primarily attributed to fewer mega deals (valued at USD 100 million+) completed during the period and a decline in overall funding activity (the number of rounds fell 28% YoY). However, funding volumes of Cryptocurrencies—the highest-funded industry this quarter—increased significantly to USD 1.1 billion from USD 9.6 million in Q1 2023, primarily due to Coinbase's massive USD 1.1 billion debt offering. Moreover, similar to the previous two quarters, demand for debt financing persisted, accounting for seven of the 10 mega deals.

FinTech Q1 2024 funding summary

• In Q1 2024, companies across the FinTech sector raised USD 4.3 billion across 85 rounds. This marked a significant decrease of 59% YoY compared with the same period in the previous year (USD 10.5 billion across 118 rounds). However, this was a modest increase of 6% QoQ compared with the USD 4.1 billion raised in Q4 2023. The YoY decline was caused by a significant drop in funds raised across the Neobanks (down 53% YoY), FinTech Infrastructure (down 96% YoY), and Business Expense Management (down 55% YoY) industries, partly offset by improvements in BNPL (up 110% YoY) and Cryptocurrencies (improved to USD 1.1 billion from less than USD 10 million in Q1 2023) industries. 

• The FinTech: Banking & Infrastructure sector, which accounted for 41% of all funds raised during the quarter, declined 80% YoY to USD 1.7 billion, followed by InsurTech (a 5% share), which dipped 56% YoY to USD 0.2 billion. However, the FinTech: Blockchain sector, which accounted for 33% of all funds raised, increased 487% YoY to USD 1.4 billion. 

• In Q1 2024, the overall deal size also saw a decline to USD 50.6 million from USD 88.9 million in Q1 2023. This can be primarily attributed to the lower funds raised as well as fewer mega deals during the quarter, particularly within FinTech: Banking & Infrastructure, where the average deal size fell to USD 64.7 million from USD 182.2 million. However, the FinTech: Blockchain industry witnessed the average deal size improve to USD 47.4 million from USD 11.0 million, while the Wealth Tech & Sustainable Finance industry saw an increase in average deal size to USD 52.4 million from USD 45.6 million.

• Coinbase, the largest cryptocurrency exchange by trading volume in the US, raised the most funds during the quarter. It issued USD 1.1 billion in post-IPO debt (convertible senior notes due April 1, 2030), with funds earmarked to pay off existing debt and the cost of capped call transactions as well as for general corporate purposes like capital expenditures.

• Other notable funding rounds include neobank Monzo raising USD 430 million in venture funding led by Capital G (owned by Alphabet) at a valuation of ~USD 5 billion. This round is also reportedly the final round before Monzo goes public via an IPO. In addition, Sunbit secured a USD 310 million debt warehouse facility co-led by Citi and Ares Management Credit.

• There were 10 mega deals in Q1 2024, with Neobanks, BNPL, and Financial Wellness Tools industries accounting for two deals each. Collectively, these rounds contributed nearly USD 2.9 billion (~67%) to the total funds raised during the quarter. Similarly, there were 10 mega deals in Q1 2023, collectively raising over USD 8.6 billion and accounting for ~82% of total funds raised. Additionally, the number of mega deals fell compared with Q4 2023, which recorded 11.

Top 10 funding rounds across FinTech Services (Q1 2024)

Product updates: Rising adoption of AI-powered products and expansion into new regions

Analyst take: A notable trend observed across companies in the FinTech sector during the quarter was the continued and rising adoption of AI/GenAI-powered products, particularly across the Business Expense Management and Insurance industries. In addition, other product launches were centered on complementing existing offerings as well as expanding geographical presence. Incumbent activity was limited during the period; nevertheless, there were notable product launches, such as HSBC launching its new multi-currency payments app.

Another notable trend during the quarter was startups making a pivotal shift in their strategy and operations, exiting their legacy businesses to focus on other business lines. For example, Oxygen terminated its banking operations to focus on health insurance offerings, while Zwipe exited the biometric payment market to focus on the biometric access control market.

FinTech: Banking and Infrastructure

• Revolut was the most active amongst neobanks, expanding its product range to new territories
  • Revolut launched “mobile wallets” to provide seamless and easy international money transfers for retail customers. This offering is similar to RevTags, which was launched for business customers in September 2023. In addition, it launched savings accounts in Romania and Flexible Accounts, an alternative savings product that invests money in money market funds, in Ireland.
  • Revolut also launched its robo-advisory platform to customers in the European Economic Area (EEA) in February 2024. The platform was first launched in the US in June 2023. Furthermore, it introduced a new AI-based scam detection feature to protect its customers against advanced card scams before funds can be transferred.

• BNPL startups launched new products to complement existing offerings
  • Klarna launched Klarna Plus, a USD 7.99 monthly subscription plan, which provides subscribers with waived service fees, double reward points, and exclusive discounts with retail partners like Nike and Instacart. Klarna also launched an open-banking-powered settlements feature in the UK, allowing its users to make payments directly via their bank accounts to Klarna.
  • Tabby, a UAE-based BNPL platform, introduced Tabby+, a AED 49 (~USD 13) monthly subscription-based flexible payment offering, which allows users to pay in four installments. It also provides 1% cashback on purchases.
  • Zilch unveiled its latest BNPL offering called Pay over 3 months, a regulated credit payment product that allows customers to spread interest-free repayments over three months for big-ticket purchases of GBP 75 and above (~USD 95+). This offering also helps users improve their credit scores through Zilch’s reporting agreements with the UK’s top Credit Reference Agencies.

• Mastercard launches open-banking-powered subscription management tool
  • In March 2024, Mastercard launched Smart Subscriptions, an open-banking-powered subscription management tool for financial institutions. This tool can be integrated with consumer banking applications to enhance consumer financial wellness.

• HSBC took on international payment providers with Zing
  • In January 2024, HSBC launched its new multi-currency payments app, Zing, to compete with international payment providers such as Wise and Paysend. Zing is a standalone product and can be used by non-HSBC customers as well. It supports more than a dozen currencies and charges varying fees for each currency. 

• Onyx Private and Oxygen terminated banking operations and pivoted toward other financial services
  • In March 2024, neobanks Oxygen and Onyx Private announced their decisions to wind down their banking operations. The companies did not provide specific reasons for this but instead announced a strategic shift in their operations. Oxygen intends to offer health insurance combined with financial solutions, while Onyx Private plans to offer its technology and platform through a B2B white-label platform-as-a-service model to community and regional banks as well as credit unions seeking to launch digital apps for young affluent consumers.

FinTech: Blockchain

• DeFi protocols launch products focusing on Bitcoin
  • Sovryn launched BitcoinOS, a series of Bitcoin rollups that enable token and asset trading directly on the Bitcoin blockchain. This enables developers to build on top of the underlying blockchain and connect decentralized applications to reduce reliance on federated bridges. 
  • VELAR rolled out a Bitcoin-based automated market-making (AMM) protocol called Dharma. This is designed to bring excess liquidity to the Bitcoin blockchain by enabling token pairs to be traded fully on-chain and provide users with tools for liquidity provision, trading, and asset management.

• SWIFT to launch CBDC platform in the next 12–24 months
  • In March 2024, SWIFT, the global banking messaging network, announced plans to launch a new platform in the next one to two years to seamlessly connect the wave of central bank digital currencies (CBDCs) currently in development to the existing financial system. Its latest trial involved central banks from Germany, France, Australia, Singapore, the Czech Republic, Thailand, and a few other countries.

FinTech: Payments

• Integrating AI capabilities continued to be a trend across Business Expense Management startups
  • HighRadius launched its first native GenAI solution called Accounts Payable Automation in March 2024. This product streamlines payment processes between payers and suppliers, offering instant responses and eliminating manual tasks. Its key features include Supplier Connect for automated communication between payers and suppliers, instant query resolution, automatic task generation for exception resolutions, and AI-powered invoice automation.
  • Itemize rolled out AI Copilots for financial transaction processing and automation. These integrate with its existing capabilities and are designed for accounts payable, remittance processing, supply chain management, and loan processing functions. 
  • Coupa unveiled new AI automation features to enhance its existing solutions, aimed at improving efficiency and enabling smarter decision-making for businesses. Additionally, the company announced plans to introduce more AI-based innovations at its upcoming "Coupa Inspire" event, scheduled to take place between April 22 and 24.

• Biometric payment companies expanded product portfolios with new offerings
  • Fingerprint Cards (FPC), a biometric sensor and software provider, introduced FPC Smart'Nroll, a reusable device for enrolling biometric data on payment cards. 
  • SmartMetric, a biometric smartcard provider, unveiled its latest credit card featuring a built-in fingerprint scanner to verify cardholders' identities with each payment. The credit card is also compatible with existing point-of-sale terminals that accept chip or contactless payments.

• Zwipe exited the biometric payment industry
  • In January 2024, Zwipe announced its exit from the biometric payment market, intending to redirect its focus toward the biometric access control space. It believes this strategic shift will help its commercial success and enable the company to operate in a leaner manner.

• Another notable product update involved PayNearMe, a semi-closed wallet provider, unveiling Smart Switch, a new, first-to-market technology that allows the onboarding of clients to multiple merchant processors. This enables the company to easily activate Smart Switch to reroute card transactions in the event of processor downtime or issues.

Wealth Tech & Sustainable Finance

• WeBull unveiled multiple new products, as it expanded geographic reach
  • WeBull launched its trading platform in Brazil in February, followed by the rollout of its cash management solution in Canada in March. In the US, it expanded its product offerings to include futures and commodities trading, allowing users to diversify their portfolios with additional asset classes.

• Robinhood made a second attempt to enter the UK market with the launch of its trading platform
  • In March 2024, Robinhood launched its commission-free trading platform in the UK, allowing users to trade US-listed stocks. The expansion is part of the company’s new strategic plan to grow beyond the US. This marks Robinhood's second attempt at entering the UK market, following the abandonment of its previous plans for a launch in 2020.

InsurTech

• AI-powered product launches were abundant within InsurTech sector
  • Business insurance provider Vouch launched a novel insurance product called AI Insurance, which helps AI startups survive lawsuits and cover financial losses. It covers risks arising from LLM hallucinations, algorithmic bias, regulatory investigations, and claims of IP infringement.
  • Clearcover, a digital auto insurer, launched a GenAI-powered claims intake tool consisting of a claims assistant and real-time customer question resolution, aimed at streamlining and digitizing the statement collection process. The new tool harnesses large language models (LLMs) to navigate a conversation-driven experience after the First Notice of Loss (FNOL) to collect information about the accident.
  • Sure, a digital insurance and infrastructure provider, introduced Quote Assist, a GenAI tool that allows insurance agents to quickly generate and personalize quotes for consumers during the insurance purchasing process. It is available for all business lines on the Sure Platform. 
  • Moreover, Zesty.ai, a provider of property risk analytics solutions, has launched a new product named Roof Age. This solution uses data from building permits and historical imagery, combined with AI, to accurately determine the age of a roof with over 90% accuracy, helping insurance carriers capture more premiums and minimize losses.

• Personal line insurers are expanding their footprint within the US
  • Lemonade expanded Lemonade Car insurance in Washington. It is now available in seven US states. Meanwhile, Boundless Rider rolled out its motorcycle and powersport insurance to Illinois, marking its availability in a third US state.
  • Furthermore, digital home insurer Kin has expanded its offerings to Texas and is now available in eight states. Additionally, Honeycomb, a homeowner and landlord insurance provider, has launched in Connecticut and Virginia, now available in 16 states.

Partnerships: Enhancing existing product portfolios; value additions drive partnership activity

Analyst take: Partnerships among companies in the FinTech sector were primarily aimed at forging alliances to develop and/or add new features to complement existing offerings as well as to expand market reach. For example, neobanks formed partnerships to add investment capabilities as well as payroll and tax solutions, while retail trading infrastructure startups incorporated savings and pension products. Furthermore, a notable trend witnessed in the InsurTech sector during the quarter was an increase in collaborations between insurers and infrastructure providers targeted at developing and enhancing underwriting and claims processing capacities.

FinTech: Banking and Infrastructure

• We observed 55 partnerships within FinTech: Banking & Infrastructure, with incumbents accounting for nearly 33% of them. The most activity was recorded in the FinTech Infrastructure industry (25), followed by Neobanks and BNPL, each recording 14 activities.

• Partnerships within the FinTech Infrastructure industry primarily revolved around geographic expansion and product enhancement, with Adyen and Terrapay (both payment infrastructure providers) emerging as the most active companies. 

• Adyen partnered with Billie to enable flexible payment methods for businesses across Europe via Adyen's platform. It also collaborated with BILL to enhance the latter’s accounts payable and receivable solutions with card acquiring and issuing capabilities, and Cleeng to enter the UAE and grow its product reach within the media and entertainment sector in the MENA region.

• Terrapay’s partnerships focused on expanding cross-border payments into new regions. It formed partnerships with Orange Finances Money Mali in Mali, Diamond Trust Bank Uganda in Uganda, and Alfardan Exchange in Qatar.

• Other notable partnerships in the FinTech Infrastructure industry included Form3 partnering with Feedzai to launch an authorized push payment (APP) fraud prevention solution and Checkout.com collaborating with Bolt to integrate their offerings to provide merchants with a one-click checkout solution.

• Incumbent activity in this space included Mastercard partnering with 4thWave, a banking-as-a-service (BaaS) platform, to integrate the latter’s platform with Mastercard's payment systems to streamline cash flow for commercial users across Eastern Europe, Middle East, and Africa, and Visa partnering with Checkout.com and Stake to launch a cross-border account funding solution within the Gulf Cooperation Council (GCC) region.

• Partnerships within the Neobanks industry centered on digital banking startups launching new products to complement their existing offerings, such as N26 partnering with Upvest to launch an investing platform in Europe. In addition, Varo collaborated with Column Tax to offer free in-app tax services, while Novo launched a payroll solution in partnership with Check.

• Other key partnerships within the Neobanks industry involve Grasshopper offering customers white-labeled FDIC-insured commercial checking accounts in alliance with Pocketbook, and also partnering with Greenlite, a GenAI-powered compliance platform, to improve its risk assessment capabilities.

• Across the BNPL industry, notable partnerships include Capchase and BBVA Spark (a subsidiary of Banco Bilbao Vizcaya Argentaria) partnering to offer integrated financing solutions for companies with recurring revenue models, leveraging Capchase's technology for digital client analysis, and Tamara collaborating with Uqudo, a digital identity verification platform, to enhance privacy and security of its transactions.

• Notable partnerships in the P2P Financial Platforms space featured Moneygram and Trustly partnering to introduce cardless payments across Europe, and Paysend expanding its collaboration with Currencycloud to roll out multi-currency wallets for money transfers and currency exchange in Europe.

FinTech: Blockchain

• Partnership activities within the FinTech: Blockchain sector were focused mostly among incumbents. We observed 15 partnerships in Q1 2024: DeFi accounted for eight and Cryptocurrency, seven.

• Across the DeFi industry, notable partnerships included XDEFI partnering with SRAX, the creator of investor insights platform Sequire, to provide Sequire's users access to decentralized assets and applications via its wallet services, and SushiSwap collaborating with  Layer N, a layer-2 protocol, to launch a decentralized derivatives platform named "Susa."

• Within the Cryptocurrency industry, Transak collaborated with Visa to enable global crypto withdrawals, and stablecoin issuer Circle partnered with Celo to issue its stablecoin, USDC, on the latter’s network to enhance real-world asset (RWA) capabilities.

FinTech: Payments

• We witnessed 17 partnerships in the FinTech: Payments sector, with Business Expense Management accounting for 12, Biometric Payments contributing three, and Digital Wallets, two.

• In the Business Expense Management industry, a noteworthy trend emerged as startups formed partnerships to automate processes. OpenEnvoy collaborated with NetSuite to launch a new AI model to automate and streamline clerical work and combat fraud in invoice processing, while Medius partnered with Antaras to develop a pre-packaged connector between Medius AP Automation and InforLN’s Cloudsuite, which enables users to automate accounts payable workflows.

• Other notable partnerships include American Express and American Express Global Business Travel (Amex GBT) partnering to integrate American Express virtual cards with the Amex GBT Neo1 spend management platform for efficient expense management for SMEs, and TreviPay and Mastercard collaborating to launch a new B2B net financing solution for any supplier accepting credit cards.

• Within Biometric Payments, IDEX Biometrics was the most active. It partnered with Accomplish Financial to unveil a biometric payment program that is accessible by visually and memory-impaired persons, and KONA I to launch biometric payment cards in Japan.

• Across Digital Wallets, notable partnerships included Mastercard and Alipay collaborating to enable banks and FinTechs to connect to Alipay's digital wallet, facilitating cross-border payments.

Wealth Tech & Sustainable Finance

• There were 17 partnerships during Q1 2023 within the Wealth Tech and Sustainable Finance sector, with Retail Trading Infrastructure accounting for seven and Capital Markets Tech accounting for six.

• Within the Retail Trading Infrastructure industry, notable activities include Acorns partnering with Helix, a banking-as-a-service platform, to launch a new debit card, and Vyzer partnering with Akoya, a data access network, to improve financial data security and control by integrating Akoya as a third financial data aggregator in Vyzer's platform. In addition, Islamic digital investment platform Wahed and Smart Pension collaborated to launch a new fully diversified Sharia-compliant workplace pension product.

• In Capital Markets Tech, Quantexa partnered with Microsoft to launch its AI-powered data intelligence platform on the Microsoft Azure Marketplace, which caters to financial institutions wanting to combat fraud.

• In the Financial Wellness Tools industry, key partnerships include Segic, an integrated benefits management platform, collaborating with Canada-based Kaira, a personal financial wellness platform. This collaboration aims to integrate Kaira's app into its platform, offering financial coaching tailored to individual financial behaviors.

InsurTech

• We observed 20 partnerships within InsurTech, with Neo Insurance accounting for the majority of partnerships (15), followed by Commercial InsurTech (5). Moreover, incumbents were responsible for a quarter of all recorded partnerships.

• In Neo Insurance, partnership activities were predominantly aimed at improving underwriting and claims processing capabilities. Nationwide partnered with DigitalOwl, an AI-powered medical records analytics platform, to use the latter's platform to optimize its life underwriting process, while Odie, a pet insurance provider, partnered with Five Sigma, a provider of claims management solutions, to implement automation and analytics to its claims process. In addition, Akur8, a provider of AI-driven pricing solutions for insurers, was selected by Freeyou Insurance and Georgia Farm Bureau to improve their pricing capabilities.

• Other partnerships in this space include Ethos, a digital life insurer, partnering with Ameritas to launch the Ethos Index Universal Life Insurance (IUL) product, which is to be sold exclusively through Ethos, as well as Nationwide partnering with Petco to introduce a new customizable pet health insurance offering available on petco.com.

• Within Commercial InsurTech, notable partnerships included Pie Insurance collaborating with Origami Risk to develop an internal claims function and NEXT Insurance partnering with Tensorflight to automate commercial property inspections and thereby improving its underwriting capabilities.

M&As: Diversification and enhancing product offerings main motives for M&As

Analyst Take: During Q1 2024, M&A transactions were centered on diversifying businesses and enhancing existing product offerings. Moreover, within the more regulated DeFi and Cryptocurrency spaces, companies resorted to acquisitions as an alternative method to quickly obtain licenses to expand offerings and market presence. A promising development this quarter was Virgin Money receiving an all-cash takeover offer worth USD 3.7 billion from Nationwide Building Society, pending approval from shareholders.

FinTech: Banking and Infrastructure

• Banking & Infrastructure startups turned to M&As to diversify business
  • Credova, a flexible payment provider for consumers and businesses, entered an agreement and plan of merger with marketplace platform PublicSquare in March 2024. The transaction involves the exchange of ~2.9 million shares of PublicSquare Class A common stock for all outstanding shares of Credova and the cancellation of Credova's subordinated debt. Following the transaction, PublicSquare intends to integrate Credova's offerings into its marketplace, creating a full-stack platform that combines payments, financing solutions, and a marketplace.
  • London-based GoCardless, an open banking infrastructure provider, entered an agreement to acquire Sentenial, which operates globally under the Nuapay brand, from EML Payments Limited for an undisclosed amount. Through this acquisition, GoCardless plans to leverage Nuapay's account-to-account payment services and open banking expertise to expedite the rollout of new disbursement capabilities and offer new payment verticals.

• Zip closed Zip Business Capital ANZ subsidiary and is to sell loans operation to Prospa
  • Australia-based Zip, a B2C and B2B BNPL provider, closed its Zip Business Capital ANZ subsidiary and is selling its loans operation to Prospa, an SME lender, for ~USD 10.3 million (AUD 15.6 million). This follows Zip’s announcement of plans to cease operations in 10 markets due to poor performance in March last year.

• Virgin Money received all-cash takeover offer worth USD 3.7 billion
  • In March 2024, Virgin Money received an all-cash take-over offer from Nationwide Building Society, the UK's largest building society, worth USD 3.7 billion (GBP 2.9 billion) to create the country's second-largest savings and mortgage provider. Through the potential acquisition, Nationwide aims to advance its strategy and enhance member value by providing a wider range of financial services. Richard Branson's Virgin Group Holdings, which founded Virgin Money and holds ~15% of its total shares in issue, indicated support for the deal; however, the transaction is yet to be approved by its shareholders.

FinTech: Blockchain

• M&A tactics offered Crypto and DeFi startups an expedited route to licenses
  • In January 2024, Coinbase announced that it was in the process of acquiring an unnamed EU Markets in Financial Instruments Directive (MiFID)-licensed entity based in Cyprus to extend its derivatives products to eligible customers in select countries across the EU. 
  • Ripple acquired Standard Custody & Trust Company, a digital assets platform, that will allow Ripple to use the latter’s limited-purpose trust charter and money transmitter licenses for its operations.

Wealth Tech & Sustainable Finance

• Ramp purchased procurement solutions startup to expand offerings
  • Ramp, a provider of diverse business expense and payout management solutions, acquired Venue, a procurement solutions provider that assists large organizations review, approve, and manage vendors in January. Following the acquisition, Ramp aimed to leverage Venue’s solutions to improve employee purchase request, approval, and payment processes through customized intake forms, flexible approval processes, purchase order management, and AI-powered vendor management.

InsurTech

• GetSafe expanded its portfolio from insurance to student loans
  • In January 2024, German digital insurer Getsafe acquired deineStudienfinanzierung, a German digital platform for student loans, for an undisclosed amount. This is part of the company’s strategic plan to serve individuals through a direct-to-consumer approach and expand its portfolio offerings. Following the acquisition, deineStudienfinanzierung will continue to operate independently and is reported to have aided more than 200,000 students with more than EUR 1 billion (~USD 1.1 billion) in financing since its inception in 2016.

• Allianz acquired Luko after unsuccessful attempt by Admiral
  • Allianz Direct, the digital insurance subsidiary of Allianz, acquired Luko, a French digital property insurer, for ~USD 4.7 million (EUR 4.3 million). This comes after Admiral's unsuccessful attempt to acquire Luko in June 2023 for EUR 11 million (~USD 12 million) due to accounting concerns during the due diligence process.

Appendix

Startups that raised funding for the first time in Q1 2024