This year, global fintech funding is flowing towards scaled banking startups competing directly with traditional banks, as well as digital asset companies despite overall funding volumes continuing to contract, according to new data released by CB Insights.

In Q1 2026, late-stage deal share in banking reached 35%, more than twice the quarterly average of 2024-2025. At the same time, total banking fell to a multi-year low of 34, and total funding dropped to US$934 million, roughly half of US$1.8 billion raised during the same period last year.

Of the capital still entering the banking vertical this year, funding is concentrated on established banking competitors rather than banking enablers like core systems and digital onboarding providers, which saw declines. Among the top ten banking deals in Q1 2026, eight went to banking challengers competing for deposits and customer relationships. These include:

• Uala, an Argentinian digital bank targeting consumer banking across Latin America (LatAm) which raised a US$195 million Series F at a US$3.2 billion valuation to support regional growth;
• Allica Bank, a digital bank for small and medium-sized enterprises (SMEs) that raised a US$150 million Series D at a US$1.2 billion valuation to fuel lending growth, deepen investment in its proprietary stack, and expand outside of its UK home market;
• Anchorage Digital, a federally chartered digital asset bank in the US that raised a US$100 million Series E at a US$4.2 billion valuation to build federally chartered crypto banking infrastructure; and
• Uzum, an Uzbekistan-based digital platform combining e-commerce, fintech, and logistics, which raised US$82 million in a Series C to expand product depth, strengthen infrastructure, and increase access to digital services nationwide.

Crypto startups: high valuation relative to team size

Another notable trend this year is the high valuation of crypto startups despite their small sizes. In Q1 2026, these ventures commanded an average valuation of US$6.4 million per employee, nearly twice the broader fintech average of US$3.5 million per employee.

This suggests that investors are placing bigger bets on smaller crypto teams, expecting them to generate substantial value with leaner operations. This is partly due to their use of blockchain technology and smart contracts, which allow them to automate settlement, reconciliation, and custody work that would otherwise require large operations teams.

CB Insights data show that of the top ten deals in Q1 2026 by valuation per employee, seven are crypto startups. These include World Liberty Financial, a crypto-focused financial company and a business venture of the Trump family with a valuation per employee of US$60 million; Kalshi, a prediction with a valuation per employee of US$48.5 million; and Rain, a enterprise-grade infrastructure for stablecoin-powered payments with a valuation per employee of US$16.8 million.

Fintech M&A declines

In Q1 2026, fintech mergers and acquisitions (M&A) activity continued its downward trend. The quarter saw 199 transactions, marking a 26% decrease from Q4 3035 and reaching a six-quarter low.

Notable deals this quarter were concentrated in areas that saw outsized funding growth in 2025, particularly cryptocurrency, spend management, and business-to-business (B2B) technology.

In particular, Capital One completed its US$5.3 billion acquisition of Brex, following the spend management sector’s fourfold funding growth in 2024 and 2025. Fireblocks acquired Tres Finance in crypto accounting and tax reporting, and Mastercard announced a US$1.8 billion deal for BVNK in the crypto payment processor vertical, which was up 3.5-fold. The transaction is still pending regulatory approval.

Public listings also declined in Q1 2026, with only 11 companies going public compared to 24 in Q4 2025. Notable initial public offerings (IPOs) include PayPay, a Japanese payments app valued at more than US$10 billion when it debuted in March; PicPay, a Brazilian digital bank valued at about US$2.6 billion during its IPO in January; and BitGo, a crypto custody firm valued at US$2.1 billion when it completed its public listing in January.

Several high-profile IPOs were postponed at the start of the year. Clear Street, which provides a modern, cloud-native platform for institutional investors and family offices, cited unfavorable market conditions, while crypto exchange Kraken has deterred its IPO plans until conditions improve, two people with knowledge of the matter told CoinDesk.

Fintech funding continues to slump

Fintech deals continued to fall in Q1 2026, totaling 762 transactions and marking a fifth consecutive quarterly decline and multi-year low. However, funding dollars rebounded to prior levels at US$12.1 billion following a Q4 2025 spike. This suggests that capital is concentrating on fewer companies, later in their lifecycle, with greater conviction.

This trend is reflected in larger deal sizes. In 2026 year-to-date (YTD), the average deal size stood at US$22.5, marking a new high and a 10.8% increase from 2025. Median deal size also rose to US$6 million, growing 27.7% from US$4.7 million in 2025.

This year, AI remained the dominant investment theme, totaling US$226.2 billion in venture capital (VC) funding raised in Q1 2026 and representing 79% of all funding for the quarter.

AI secured some of the period’s largest transactions, including US$122 billion for OpenAI, US$30 billion for Anthropic, US$16 billion for Waymo, and US$7.5 billion for xAI.

Market outlook

Looking ahead, industry experts expect several trends to shape the 2026 fintech landscape. Stablecoins and other digital assets are poised to continue to gain momentum as traditional corporates, maturing startups, and new startups capitalize on new opportunities amid enhanced regulatory certainty.

Capital markets are set to experience significant disruption throughout 2026, with investors looking at all aspects of the market, from equity, stocks, and shares to debt capital markets, project and export finance, and the shift to private credit.

Finally, asset management will remain an area of interest as well-established managers start to take significant strides to improve the efficiency of their front, middle, and back offices, including moving to the cloud, embracing data solutions, integrating AI agent, and tokenizing funds.

Featured image: Edited by Fintech News Switzerland, based on image by freepik via Magnific