Venture capital funding for fintech companies is on track for its best quarter since 2018, following a year that brought digital functionality in financial institutions to the forefront.  

Quarterly fintech funding by the end of February exceeded $13.4 billion, and the momentum is likely to continue, according to a report released last week by research firm CB Insights. A case in point is the blockbuster fundraising rounds by cloud payments platform Stripe, which raised $600 million in a recent round, taking its evaluation to $95 billion. Robotic Process Automation (RPA) software provider UiPath also raised $750 million last month and was valued at $35 billion.  

While funding volume has grown, the share of seed or “angel” rounds dipped to 31% at the end of February from 39% in the first quarter of 2020, according to the report by CB Insights. At the same time, the proportion of “high value” deals above $100 million has hit a record high last month, accounting for 8% of all deals in the current quarter, up from 3% of all deals in Q1 of 2019, the report said.  

Although a pivot toward contactless digital services during the COVID-19 pandemic and a low –interest rate macro environment may have spurred some of the renewed interest in fintech funding, the rise of high value deals and dip in seed investment may also be indicative of maturation in the sector.  

“There certainly has been consolidation in the space,” Alex Kern, an analyst at CB Insights, told Bank Automation News. He added that the availability of relatively cheap capital searching for yields allows late-stage firms, like Stripe, to access funds without needing to turn to public markets; other fintechs have sought to do this through IPOs, direct listings, or through merging with special purpose acquisition companies, or SPACs.  

The fundraising season has also been kind to automation-related fintech firms such as WorkFusion, which announced a $220 million Series F funding round last week. Zeni, a bookkeeping automation firm, and Flowcast, the automation provider for Dutch multinational bank ING, also raised $13.5 million and $3 million, respectively, in recent fundraising rounds.  

While Kern noted that it’s hard to get visibility into the cost savings banks can effect by turning to automation, he said banks are looking to deliver better customer services and enable the option for digital functionalities that emerged during the pandemic. Although performance metrics differ according to application, Kern said “customer growth and engagement” are likely to be the key performance indicators for firms in the payments, banking and financial sectors.  

Geographically, there’s likely to be, “sustained growth” in fintech funding in areas like North America and Europe, and developing countries like India and Brazil could also witness increased interest, Kern said. 

Bank Automation Ignite, on April 13-14, is the event for inspiring automation initiatives and investment in financial services. At the virtual event, financial services professionals can discover new use cases and technologies that are accelerating automation in banking. Learn more and register at www.BankAutomationIgnite.com.