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Fintech funding falls as Covid-19 hits home

Fintech funding falls as Covid-19 hits home

As the Covid-19 fallout hit home, fintech funding saw its third straight quarterly decline in Q2, according to data from Forrester.

The global fintech sector raised $6.34 billion in the second quarter, down from $12.83 billion in Q2 2018, according to Forrester.

"It’s now clear: 2020 will be a lean year. At the current pace, investors would need to more than double their investments in the back half of the year to match last year’s funding levels; we see that outcome as unlikely in the current economic climate," says the report.

Most of the money that was invested went toward digital banks, lenders, and payment providers, continuing the trend of VCs pouring money into well-established and crowded fintech areas.

Meanwhile, investors are moving money away from seed and early-stages toward late stages which are considered safer bets. More than half of fintech funding went to later stage financing, while investors are also mostly betting on firms that improve existing processes.

As for the future, Forrester expects to see a lot of M&A activity and consolidation as the sector faces up to the Covid-19 realities. Larger players will buy others to expand.

Many firms that compete directly with banks will be in jeopardy while others face up to new competition from tech titans - such as Facebook, Apple and Google - moving aggressively into the sector.

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