Emerging Trends Part III: Fintech

As we move into the final quarter of 2020, our team at Conduit sat down to analyze key emerging sectors that we’ve been watching closely. Critically, each of the sectors has drawn enormous interest from a range of strategic angels, early-stage funds, and growth funds alike. In the third installment of this four-part series, we’ll focus specifically on emerging fintech trends.

The continually expanding cohort of challenger banks, or neobanks, in the digital banking space is predicted to rise through the end of 2020 and early next year, both with regards to customer adoption and heightened investment interest from early and growth-focused funds alike. As we’ve pointed out before at Conduit, this challenger cohort is comprised of digital-first players that share a clear focus on the customer experience layer of the banking experience, a distinctly underserved component of the modern baking system on a macro scale.

Among the emerging players, three specific startups stand out. First, Point is an elevated consumer banking app combined with a debit card seeking to reproduce the experience of credit cards through a rewards and a point-based system. The company closed a $10.5 million Series A round led by Valar with Y Combinator and Kindred Ventures participating.

Second, N26 has taken a novel platform approach to banking. In Europe, the platform partnered with other fintechs for P2P money-transfers (TransferWise), savings (Raisin), investments (Vaamo), insurance (Clark), and lending (Auxmoney). Last January, the Berlin-based startup announced a $300m round valuing the company at approximately $3.5 billion. Third, Revolut’s challenger bank has rapidly expanded to new geographies outside of its home market in the UK.

From a macro investment lens, the global wealthtech industry offers a chance to disrupt an unsexy vertical with the potential to yield outsized returns. In 2019 alone, VC firms invested a record $2.1 billion into the nascent sector. Critically, the majority of the robo advisors and wealth management players on the market either fall under low cost and low personalization or high cost and high personalization, with little room in the middle. As a result, our team believes there continues to remain a massive opportunity to bridge the gap through innovation across financial planning services, artificial intelligence, and machine learning.

Among the leaders in this space, three immediately stood out to our team. First, Facet Wealth recently raised a fresh $25 million in financing as it prepares a new business line pitching financial planning as an employment benefit to businesses looking to recruit top talent. Warburg Pincus, the multi-billion-dollar PE fund, recently doubled down on its commitment with the new financing round, specifically fueling the growth of its direct-to-consumer vertical.

Second, Vise AI, which raised a $15 million Series A back in May, automates investment management for financial advisors using AI. The team built a full-stack platform spanning the entire lifecycle of the advisor-client relationship, including designing personalized portfolios for clients, managing portfolios, and providing on-going intelligence. Third, Vestwell, a tech platform for retirement plans, recently closed $30 million from Goldman Sachs and Point72, among other notable backers. Founded in 2016, the platform works with independent wealth management firms, human resources companies, asset managers and others to provide online platforms where companies can store and manage employees’ 401(k) retirement plans.

Across the SMB online lending space, small business owners are increasingly demanding greater accessibility, efficiency, and savings throughout the process, especially as digital lending solutions become more and more sophisticated over time. Existing problems plaguing SMB owners innclude vendor market fragmentation and time-consuming information collection processes from prospective borrowers. As we dove into this space, a few leaders stood out.

First, Brazil-based Creditas, which has raised over $312 million in disclosed funding, offers a digital lending platform for consumers that funds customer loans through both investors and financial institutions. Its core products include a version of home equity and auto loans, in which borrowers offer residences or vehicles as collateral for first-lien lending products.

Creditas sits among a host of emerging lending startups that are actively transforming Latin America and the Caribbean into a hotspot for fintech growth. Second, Mexico-based Credijusto, which has raised over $150 million to date, focuses on SMB companies and individuals and has originated over $70 million in loans. Finally, Colombia-based Sempli, with disclosed funding of $17 million as of this past year, grants loans to underserved SMBs across the region.

At Conduit, we connect the world’s best operator-investors and founders building the next generation of startups around the world.

As we scale our platform, understanding key market shifts across verticals will become increasingly vital. Our team will be digging deeper into emerging trends and first movers in the coming weeks, which you can find here.

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