Fintech funding hit record levels in 2021—but 2022 could be even bigger

The news: CB Insights’ 2021 State of Venture Report confirms fintech funding smashed several records last year, with $132 billion raised. Fintechs captured $1 in every $5 from venture capital firms.

Fintech funding by the numbers: Volume, exits, and early-stage deals all ticked up last year.

• Fintech funding surged by 169% from 2020 to $131.5 billion in 2021— the most funding on record.
• Q4 funding was the second-largest quarterly haul in history, at $34.9 billion, which included crypto tech firm NYDIG’s last-minute $1 billion raise.
• There were also a record number of M&A, IPO, and SPAC exits—M&A and IPOs peaked in Q4.
• And the proportion of early stage deals also ticked up from 61% to 64%, suggesting that younger startups weren’t missing out despite the mega-rounds that stole headlines.

What’s coming in 2022? We predict fintech funding will surpass 2021 levels and exceed the $150 billion mark as several areas, like blockchain and B2B tech firms, attract a wide pool of investors.

• New tech applications like open finance and blockchain will grab a wider pool of global investors, including hedge funds.
• Crypto exchanges will also keep raising an abundance of capital. Despite recent volatility, leading financial institutions like Goldman Sachs are still bullish about crypto prices.
• And large firms are still digitizing—S&P 500 companies will increase their capital expenditures and research and development investment by 18% this year from 2019 levels, per Goldman Sachs.
• But a staggering 94% of financial services firms said they’re struggling with the frenetic pace of digital transformation of the past two years, per a survey from ITRS Group.
• As large firms both ramp up investments in and struggle to digitize, B2B fintechs that can provide white-label solutions or the infrastructure to build them in-house will attract funding.
• And several recent venture capital war chests focused on fintechs—including Ribbit Capital’s $1.5 billion pot—also augur elevated investment in the sector.