Private Fintech Continues to Outperform Expectations, Following 2021 Trend

Despite the COVID-19 outbreak, fintech grew ever stronger in 2020 and 2021, and it shows no signs of stopping. Even though this market had a wobbly start in early January, 2022 is shaping up to be another banner year for the industry.

The Matrix Fintech Index is a market-cap weighted index that tracks the progress of 25 leading public fintech companies. During 2020, the Matrix Fintech Index rose by 97% (the S&P grew by just 14%, for example), and although it went down by roughly 30% in the last few months of 2021, the situation for 2022 looks promising.

This constant outperformance of the fintech index compared to the rest of the market implies that some COVID-19 trends are here to stay. These include heightened volumes of digital interactions, online payments, and a general shift toward eCommerce platforms.

Retail eCommerce is one of the categories that grew the most (35% YoY as of the third quarter of 2020). What’s more, payment providers like Square also benefitted thanks to this new trend: By the end of April 2020, 35% of all Square merchants were cashless businesses. By August 2020, cash transactions at Square merchants dropped a further 7.4%.

In 2021, some new consumer companies entered the market, including Coinbase, Lemonade, and Robinhood. Some of these companies skipped the traditional IPO process. Companies like the UK’s Wise, and Coinbase in the US still went the “traditional” route, while Hippo, Metromile, and SoFi used SPAC.

Public markets aren't the only ones that hit new peaks during 2021; private markets followed as well. VC funding into private fintech companies increased by 177% compared to 2020, overshooting $134 billion.

Although not all fintech companies performed as well as the leading tech companies for 2021, the value created by new technology IPOs is undeniable.