Fintech
sector update
Important disclosures appear at the end of this report
GP Bullhound Corporate Finance Ltd and GP Bullhound Asset Management Limited are authorised and
regulated by the Financial Conduct Authority
GP Bullhound Inc is a member of FINRA
GP Bullhound Hong Kong Limited is authorised and regulated by the Securities & Futures Commission
Qualitative insights into broader Fintech trends and public and private valuations across the transaction spectrum, and
interviews with today’s leaders transforming the sector.
Q3 2021
2
Takeaways
Investments accelerating at a record pace improving financial
inclusion in a region that traditionally suffers from access to formal
financial services
A rush on to fund Fintech in Africa, with a significant uptick in
investment in 2021 YTD standing at over $2bn vs. $0.5bn for the
whole of 2020
THE VIEW
Q3 Fintech
perspectives from
GP Bullhound
Impact investing will soon move mainstream with a significant
volume of investment already ongoing and expected to this asset
class in coming years
With impact investing going mainstream, technology is key to
meet investors’ ESG expectations. Specific fintech segments such
as investment apps for instance have a unique position to
leverage technology and data to drive impact investing
FINTECH IS
DRIVING IMPACT
INVESTING
THROUGH
TECHNOLOGY
The COVID-19 pandemic has accelerated the shift away from
credit cards with ‘Buy Now, Pay Later’ taking centre stage
Until recently the BNPL market has been dominated by early
pioneers, but as consumers flock towards the payment method
significant M&A activity and fundraising activity
THE LINE BETWEEN
CREDIT CARDS
AND BNPL GETS
INCREASINGLY
BLURY
Takeaways
MOBILE MONEY
DOMINATES
FINTECH
INVESTMENT IN
AFRICA
3
GP Bullhound’s recent Fintech activity
A LEADING TECHNOLOGY ADVISORY AND INVESTMENT FIRM, PROVIDING TRANSACTION ADVICE AND CAPITAL
Investment
Banking
Investment
Management
Takeaways
ACQUIRED BYINVESTMENT BYINVESTMENT BYACQUIRED BYACQUIRED BYINVESTMENT BY
INVESTMENT BYINVESTMENT BYACQUIRED BYINVESTMENT BY INVESTMENT BY ACQUIRED BY INVESTMENT BY
INVESTMENT BY
Fund I
INVESTMENT BY
Fund III
INVESTMENT BY
Fund III
INVESTMENT BY
Fund IV
INVESTMENT BY
Fund IV
4
The line between credit cards and BNPL gets
increasingly blurry
GP BULLHOUND’S SECTOR TAKEAWAYS
Takeaways
Sources: Capital IQ, press releases (as of 30 September 2021); Note: 1) Juniper research
The hottest game in town right now is ‘Buy Now, Pay Later’
As consumers flock towards BNPL, significant M&A & fundraising activity this quarter
The COVID-19 pandemic has accelerated the shift away from credit cards with, BNPL taking centre stage as the
favoured form of credit, especially amongst younger generations, thanks to platforms’ convenience and ease of use.
For retailers the lure of BNPL is simple: customers spend more, as it increases the average basket size and reduces
dropped baskets.
Until recently the BNPL market has been dominated by pioneers such as Klarna (one of Europe’s leading fintechs valued
at over $45bn) and AfterPay (an Australian headquartered fintech) recently acquired by Square for $29bn.
Spending via BNPL services is now predicted to reach $995bn in five years
1
, almost four times the current figure. The fight
against BNPL leaders is now on, with significant capital being raised by newcomers. Incumbents are also getting in on
the action, with Mastercard tapping into the market with its latest offering, as BNPL threatens to chip away at the
dominance of credit cards as the main source of payments.
There has been a hive of M&A activity this quarter, but we believe this is just the beginning with strategics having built up
a stockpile of cash to weather the pandemic that they are now looking to deploy:
Goldman Sachs acquired lender Greensky for $2.2bn to attract customers to its Marcus brand of finance products
PayPal acquired Japanese BNPL firm Paidy in a $2.7bn deal
Payments company Square reached a deal to acquire Australian (BNPL) provider Afterpay for $29bn
As big BNPL companies get even bigger, many smaller but fast-growing BNPL companies are raising record sums:
ZestMoney, an India-based BNPL platform raised $50bm led by Australia’s Zip
Scalapay BNPL technology provider raised $155m at a $700m valuation from Tiger Global
Zilch, a UK based BNPL firm, raised $110m led by Goldman Sachs Asset Management & DMG Ventures
Select transactions
in Q3 2021
DEAL DATE: JAN-21
TTV: $3.4N
EV/REV: N/A
DEAL DATE: AUG-21
EV: $29BN
DEAL DATE: SEP-21
EV: $2.24BN
DEAL DATE: SEP-21
RAISED: $700M
DEAL DATE: JUL-21
RAISED: $200M
5
Mobile money dominates fintech investment
in Africa
GP BULLHOUND’S SECTOR TAKEAWAYS
Takeaways
Sources: Capital IQ, press releases (as of 30 September 2021); Note: 1) TechCrunch; 2) The Global Payments Report 2021,
Worldpay; 3) GP Bullhound research, Pitchbook
Africa represents a large and relatively untapped opportunity
A rush to fund Fintech in Africa
Fintech investments in Africa are accelerating at a record pace, improving financial inclusion in a region that traditionally
suffers from limited access to formal financial services such as banking, credit, and insurance.
The region represents a large and relatively untapped opportunity that is poised to drive the next wave of growth for
large internet companies given the young demographics (high proportion of the population are under 25 years old and
digitally native), with increasing mobile and internet penetration and growing economic power.
With e-commerce poised for explosive growth, topping $29bn
1
next year, the region has seen rapid adoption of mobile
wallets due to the high underbanked population coupled with relatively high mobile penetration. Digital / mobile wallet
payments are expected to grow by 45% to account for over one-fifth of e-commerce spend by 2024
2
.
There was a significant uptick in fintech investments in Africa in Q3 2021. Funding in 2021 YTD stands at over $2bn versus
c.$0.5bn for the whole of 2020
3
, which we believe shows the current and future prominence of digital financial services
across the continent. Notable activity in Q3 20201 included:
Wave, a US and Senegal-based mobile money provider, raised a record $200m in Series A from Sequoia Heritage,
Founders Fund, Stripe, and Ribbit Capital.
OPay, a Nigerian mobile-payments platform, was valued at $2bn in a latest $400m fundraising led by SoftBank Vision
Fund 2, making Opay the fifth unicorn in Africa alongside Interswitch, Jumia, Fawry, and Flutterwave.
Mono, an African startup helping to connect consumers’ bank accounts to financial applications, raised $15m in
Series A from Tiger Global. This is Tiger Global’s third major investment in Africa this year after Flutterwave and
FairMoney.
Australian BNPL company Zip acquired South African-based BNPL player Payflex, showing how Africa is ripe for BNPL
disruption.
Select transactions
in Q3 2021
DEAL DATE: AUG-21
POST-MONEY
VALUATION: $2BN
RAISED: $400M
DEAL DATE: OCT-21
POST-MONEY
VALUATION: N.A.
RAISED: $15M
DEAL DATE: SEP-21
POST-MONEY
VALUATION: $1.7BN
RAISED: $200M
DEAL DATE: SEP-21
EV: UNDISCLOSED