June was a bustling period in the fintech sector with 157 capital and debt financing deals concluded, closely aligning with the 12-month moving average and marking a minimal decrease from the previous month.
A total of 116 capital injections were completed, which was 8 percent below the 12-month average. The sectors attracting the most capital included finance (18 deals), payments (17 deals), banking (16 deals), software (15 deals), and insurtech (13 deals).
The fintech market also experienced significant funding in the credit market in June, with 41 loan agreements surpassing the 12-month moving average. In terms of financing value, June’s figures were 58 percent above the average of the past year. Overall, market participants secured $9.3 billion in capital and loan agreements, with $7.6 billion coming from debt financing—seven times the amount from June of the previous year. The total value of capital injections stood at $1.7 billion, nearly identical to the previous month and roughly in line with the annual average.
The market consolidation index, which measures the ratio of mergers and acquisitions (M&A) transactions to financing deals in the fintech sector, has been declining since reaching a record 0.39 in April, dropping to 0.32 in June. However, this value still indicates robust M&A activity, a trend observed since early 2024. In June there were a total of 51 M&A agreements in the fintech sector, making it the third strongest month in the past 28 months for M&A activities.
Key Trends of The Month
Rising Collaboration in the BNPL Sector?
The BNPL sector is witnessing a shift towards increased collaboration, highlighted by two significant developments this month: Klarna’s sale of its checkout business and Apple’s suspension of its Apple Pay Later service. Klarna’s decision to divest its checkout unit for 5.4 billion kronor (approximately $508 million) aims to resolve conflicts with key partners like Stripe and Adyen and focus solely on BNPL services. This move aligns with a broader industry trend favoring specialization. Concurrently, Apple is ending its Apple Pay Later service to reduce risks associated with self-financing loans, instead partnering with Affirm to offer new installment payment options. These strategic moves underscore a growing emphasis on partnerships in the BNPL sector, allowing companies to enhance their services and mitigate direct competition and associated risks.
UK Incumbents Steer Clear of Neobank Acquisitions
Several major players in the UK’s banking sector invested in retail-founded banks, with mixed results. Two of three such institutions are ceasing operations. Tesco Bank is selling its existing credit card, loan, and savings activities to Barclays, Sainsbury’s Bank is divesting significant banking assets to NatWest, and Marks & Spencer Bank is nearing a deal with HSBC to transform its banking division into a super app focused on financial services and a customer loyalty program.
This trend highlights that incumbents were not necessarily interested in the more innovative neobanks. The news show a robust layer of neobanks that have achieved profitable, sustainable operations, making them challenging to acquire as they thrive independently or are on an upward trajectory.
Synapse-Evolve Scandal
One of the most significant fintech stories in recent months is the Synapse and Evolve Bank & Trust crisis, shedding light on the risks in bank-fintech collaborations, particularly in the Banking-as-a-Service area. Synapse’s business model relied on leveraging services from multiple partner banks to execute different parts of the same transaction.
However, in early 2024, Synapse filed for bankruptcy, revealing a discrepancy: while partner banks held only $180 million in customer deposits, Synapse owed customers $265 million. The Synapse-Evolve crisis underscores the substantial issues within fintech-banking ecosystems, from inadequate security practices to complex fund management and reconciliation challenges.
Don’t forget to check out our brand new video in which we examine the fintech sector’s performance. Disclaimer: the below video was made using artificial intelligence.
(Cover photos: Depositphotos)