Skip to main content

Fintechs could see $100 billion of liquidity in 2021

We believe one of the most important trends to gain traction in the last three years to be point-of-sale financing, now referred to as Buy Now Pay Later (BNPL).
Jake Jolis Contributor Jake Jolis is a partner at Matrix Partners and invests in seed and Series A technology companies including marketplaces and software. More posts by this contributorDana Stalder Contributor Dana Stalder is a partner at Matrix Partners, where he invests predominantly in fintech, consumer marketplaces and enterprise software. More posts by this contributorBen Altshuler Contributor Ben Altshuler is a partner at Matrix Partners who focuses on fintech and infrastructure investments.

Three years ago, we released the first edition of the Matrix Fintech Index. We believed then, as we do now, that fintech represents one of the most exciting major innovation cycles of this decade. In 2020, all the long-term trends forcing change in this sector continued and even accelerated.

The broad movement away from credit toward debit, particularly among younger consumers, represents one such macro shift. However, the pandemic also created new, unforeseen drivers. Among them, millennials decamped from their rentals in crowded cities to accelerate their first home purchase, to the benefit of proptech companies and challenger mortgage players alike.

E-commerce saw an enormous acceleration in growth rates, furthering adoption of online payments platforms. Lastly, low interest rates and looming inflation helped pave the way for the price of Bitcoin to charge toward $30,000. In short, multiple tailwinds combined to produce a blockbuster year for the category.

In this year’s refresh of the Matrix Fintech Index, we’ll divide our attention into three parts. First, a look at the public stocks’ performance. Second, liquidity. Third, we highlight one major trend in the sector: Buy Now Pay Later, or BNPL.

Public fintech stocks rose 97% in 2020

For the fourth straight year, the publicly traded fintechs massively outperformed the incumbent financial services providers as well as every mainstream stock index. While the underlying performance of these companies was strong, the pandemic further bolstered results as consumers avoided appearing in-person for both shopping and banking. Instead, they sought — and found — digital alternatives.

For the fourth straight year, the publicly traded fintechs massively outperformed the incumbent financial services providers as well as every mainstream stock index.

Our own representation of the public fintechs’ performance is the Matrix Fintech Index — a market cap-weighted index that tracks the progress of a portfolio of 25 leading public fintech companies. The Matrix fintech Index rose 97% in 2020, compared to a 14% rise in the S&P 500 and a 10% drop for the incumbent financial service companies over the same time period.

 

2020 performance of individual fintech companies vs. SPX

2020 performance of individual fintech companies versus S&P 500. Image Credits: PitchBook

 

Fintech incumbents and new entrants vs. the S&P 500

Fintech incumbents and new entrants versus the S&P 500. Image Credits: PitchBook

E-commerce undoubtedly stood out as a major driver. As a category, retail e-commerce grew 35% YoY as of Q3, propelling PayPal and Shopify to add over $160 billion of market capitalization over the year. For its part, PayPal in the third quarter signed up 15 million net new active accounts (its highest ever).

Data & News supplied by www.cloudquote.io
Stock quotes supplied by Barchart
Quotes delayed at least 20 minutes.
By accessing this page, you agree to the following
Privacy Policy and Terms and Conditions.