2021 FinTech Roundup: Stacking the Neobanking Stakes
Updated: Dec 21, 2021
As we witness another year calling it a wrap, we reflect back on some of the breakthroughs that make 2021 the dawn of a whole new era for digital-first funding. The post-COVID world has indulged itself towards a customer-centric mindset, fanning the flames of digital innovation amongst financial institutions. Attempting to win in the race of hyper-personalized experiences, startups and scale-ups alike took to remodeling their platforms with consumer-friendly business models and technological infrastructures. The acceleration has fueled the growth of a diverse set of neobanks including independent full-service neobanks, credit-focused neobanks, vertical niche-focused neobanks, digital bank subsidiaries, etc. – attracting massive investments to strengthen the vision of establishing the next generation of seamless and superior banking.
To put it simply, 2021 had investors and investment firms going all-in on Digital-first banking like:
Needless to say, this year has observed some remarkable funding rounds that took over every headline possible. A prompt overlook at the hierarchy of the neobanking investment galore puts the spotlight on the key neobanks who raised it big during the course of this year:
The Million Dollar Club ($1-10 M) – While there’s a larger re-bundling trend that has swept the neobanking segment – with larger neobanks expanding their product portfolio across financial and lifestyle products – the unbundling phenomenon still continues. A plethora of early-stage neobanks raised pre-seed and seed investments in 2021. Neobanks like Daylight, First Boulevard, Chqbook, etc. raised funding with a proposition of providing inclusive finance for underserved segments like the LGBTQ+, black community, and micro-enterprises respectively. Nigerian fintech Prospa’s $3.8m pre-seed investment from Global Founders Capital and Liquid 2 Ventures; sustainable bank Ardo’s $6m seed capital round; and Visa’s $5m investment in Indian neobank Open make for some notable names under this category.
Taking It Up A Notch ($10-100 M) – A diverse set of players were observed to raise funds in the next series of rounds. e-Commerce Banking platform Juni was amongst the few who made it to this list – with raising $73m in its Series A funding round. Other names include those of Aussie neobank Volt, who landed a $37.7m deal in alliance with Australian Finance Group Ltd.; US-based SMB-focused neobank Novo, who closed a round of $40.7m in its latest Series A funding round; and the securing of $17m in a pre-Series B funding by the Philippines' credit-focused neobank Tonik.
Raising The Bar ($100-500 M) – As we move up the neobanking funding pyramid, we observe the names of some of the head-turners of this season. UK-based Monzo’s fresh $500m funding round helped jump its valuation to a booming $4.5b. On similar lines was Open’s October $100m fundraise by Temasek, valuing the neobank at an overall $500m. South Africa’s TymeBank has also raised a total amount of $180m, thanks to its recent Series B extension—led by Tencent and CDC group—which helped raise the neobank $70m. UK-based Zopa, US challenger bank Mercury, and Danish neobank Lunar were also amongst those who walked home with a nifty sum.
Reaching The Crescendo ($500M+) – Amongst the big 5 mega-neobanks who made it to the top of the fund-raising pyramid, Latin America’s beloved Nubank took headlines by the storm with its multiple rounds of investments within the same year. Its Series G funding of $750m in June 2021 swelled its total valuation to a thriving $30b. Revolut also became UK’s most valued digital bank - in securing its recent Series E funding of $800m, thereby shooting its valuation all the way up to $33b. N26’s record-breaking $900m raise at a $9b valuation topped the charts, entering the German challenger bank in the list of the top 20 Fintechs in the world. US-based Chime and Varo also made their own headline-worthy funding rounds, placing each at billion-dollar valuations. Among the big 5, only Chime still operates in partnership with a couple of sponsor banks, while the remaining four have obtained full-fledged banking licenses to challenge the incumbents’ business from the ground up.
The most extraordinary triumph that the year 2021 has held for these neobanks was the ability to grow and expand their businesses through multiple funding rounds witnessed within short spans of time, i.e. within the same year. The next year may hold even more game-changing opportunities for these challengers to implore – with emerging trends of embedded finance, SuperApps, DeFi, etc., paving their way into the field of finance – where the landscape remains open to the medley of interplay.