During the Corona crisis, young financial companies received less money from investors for the first time in years. From January to September the FinTechs received EUR 953 million in venture capital, shows a study by Bank Comdirect with the consulting firm Barkow Consulting and the Commerzbank investor Main Incubator. That is almost a third (29 percent) less than in the first nine months of last year, when funds and corporations invested around 1.3 billion in the industry.
Start-ups got record money
The corona crisis slowed the number of financing rounds in the third quarter, according to the paper published on Sunday. A decline from the strong prior-year quarter is also to be expected for the end of the year. “Although 2020 will be the second best FinTech investment year of all time in Germany, the lower number of mega-rounds with a volume of over 100 million euros has a clearly negative impact,” said Matthias Hach, Comdirect Board Member, Marketing & Digital Banking Solutions at Commerzbank.
The decline in fresh money means a turning point for FinTechs who want to use intuitive technology to save, invest, insure or real estate services faster and more conveniently. Since the start of the study in 2012, investments in start-ups have increased every year – in 2018 and 2019 there were even growth rates of over 50 percent compared to the previous year. In the long economic boom and in view of the low interest rates, investors’ money was quite loose, and start-ups received record money for their business ideas. Since 2012, more than six billion euros in venture capital has flowed into the industry, according to the study. In addition, there were investments through takeovers and debt capital.
The pressure to innovate on the financial sector remains high
In the current year, the industry continued to grow to 946 fintechs at the end of September, although there were slightly fewer start-ups. The pressure to innovate on the financial sector remains high, said Hach. “In times of low interest rates, we are seeing an increasing trend towards simple and mobile investment options.”
Financial start-ups benefit from the digitization of the financial sector. In recent years, however, a selection from bankruptcies and takeovers showed that only relatively few prevail, according to a study by the consulting firm PwC. The most successful fintechs include interest portals, through which savers can choose the best conditions from many banks. Some investment robots that invest their wealth on the stock exchange, as well as smartphone banks such as N26, have also grown.