After several quarters of weakness, funding for digital banking startups is on the rise.
Over the past three months, investors have poured nearly $1.2 billion into a geographically diverse group of online banking providers, according to data from Crunchbase. Three of the largest funders, One, Tyme and Current, announced new rounds last week.
The single biggest gain went to One Inc., a Sacramento, Calif.-based startup that offers online banking, debit cards and installment loans for purchases at Walmart, where it is majority shareholder. Walmart and fintech investor Rivit Capital led the $300 million round at a reported valuation of $2.5 billion.
Time Inc., which provides digital banking in South Africa and the Philippines, has secured its next largest Series D round of $250 million. Brazil’s Nubank led the funding, valuing the five-year-old Singapore-based company at $1.5 billion. company.
New York-based Current announced its latest funding last week. The company has raised $200 million in funding, bringing its total investment to date to more than $600 million. The company said its revenue has increased by more than 90% this year and it aims to return to profitability in 2025.
These three weren’t the only big fundraisers. Using data from Crunchbase, we’ve compiled a list of seven digital banking startups that have disclosed significant new funding in the past four months.
time of exit
The funding comes amid hopes for a resurgence of fintech IPOs in 2025, with several major companies preparing to go public.
One of the companies gaining the most attention is San Francisco-based Chime. The company is a pioneering challenger bank founded in 2012 and has raised $2.3 billion in known equity funding to date. The company reportedly secretly filed for an IPO and Morgan Stanley was named to lead the offering.
An early entrant into the digital banking space, Chime markets itself as a “wallet-friendly” alternative to traditional banks, with no overdraft fees or minimum balance requirements. Currently, it is said to have around 7 million users, and it generates revenue primarily from interchange fees that merchants pay when purchasing cards.
Another splashy fintech debut expected in 2025 is Swedish buy now, pay later platform Klarna. The company revealed last month that it had confidentially filed for an IPO in the United States. A successful Klarna IPO could go a long way toward reinvigorating public investor appetite for new fintech products.
Other big names have also been talked about as potential IPO candidates, including the perennially popular Stripe, which has remained private until now. Meanwhile, among neobanks, UK-based banking app Revolut is reportedly considering launching in the US. Additionally, Berlin-based digital bank N26 recently announced its first quarterly profit and revenue forecast, the kind of move startups make when they’re on an IPO track.
Public markets seem to favor fintechs these days
These days, public markets also seem to be more receptive to new fintech entrants. In particular, some of the best-known companies that went public during the 2020-2021 IPO and SPAC boom, and whose stock prices plummeted in the subsequent correction, have since recovered nicely.
Shares in installment finance company Affirm have increased several times since last year, and the company’s recent market capitalization is about $20 billion. Consumer lender and financial services provider SoFi’s stock saw a similar rise, giving the company a recent valuation of about $17 billion.
Coinbase and Robinhood have also soared in recent months, driven by investor enthusiasm for cryptocurrencies.
In the neobank space, flagship Nubank, trading as Nu Holdings, hit a record high in October. Since then, the stock has fallen somewhat, but the company still commands a hefty market cap of about $55 billion.
It’s almost time
The cycle has turned and it appears we are entering a more bullish phase for fintechs and challenger banks.
Of course, that’s not a given. For example, this week’s market selloff following the Federal Reserve’s cautious statements about future interest rate cuts caused fintech companies to erase some of their recent gains. And we haven’t seen any fintech unicorns enter the U.S. public markets in recent quarters, so it’s unclear how well-received they will be.
Still, given that fintech reigned as the leader in startup funding just a few years ago, it doesn’t seem unreasonable that those who survived the crisis could enjoy better times ahead.
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Illustration: Dom Guzman
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