Investor sentiment toward retail fintech companies improved in 2024, with total funding and deal sizes increasing, new data released by PitchBook show.

This growth reflects investor optimism fueled by rapid expansion in the digital banking sector, expectations of a re-opening initial public offering (IPO) window, and recovering mergers and acquisitions (M&A) activity.

Retail fintech venture capital (VC) deals reached US$12.1 billion across 556 transactions in 2024, representing a remarkable 55% year-over-year (YoY) increase in deal value, but a 22.8% YoY decline in deal count. These figures suggest that deal sizes increased significantly in 2024, with the median deal size rising from US$3 billion in 2023 to US$4 billion in 2024.

This trend was driven in part by an increase in late-stage and venture growth rounds in 2024, highlighting a shift towards more established fintech firms.

Digital banks and credit services led the surge in retail fintech funding activity last year, raking in big venture checks amid strong traction among younger and underbanked communities. Notable transactions in 2024 included Uala’s US$300 million Series E in November, Neo Financial’s US$251 million equity and debt round in November, and Koho’s US$132 million equity and debt financing round in October.

Uala is a Latin American (LatAm) neobank founded in Argentina, serving more than eight million users. The company, which offers products such as debit and credit cards, payment services, loans, investment products, and acquiring solutions for merchants, is now focused on expanding its financial ecosystem and accelerating its growth in the markets where it operates.

Neo Financial is a leading Canadian fintech company offering products including bank accounts, credit cards, mortgages, savings accounts, investments and artificial intelligence (AI)-powered budgeting tools. The company is working on expanding its suite of innovative financial services products, offering competitive alternatives to traditional banks.

Also based in Canada, Koho provides a range of financial services through its mobile app, including payment cards, cashback rewards, savings accounts, and even cash advances. The company, which claims more than 1.5 million users, is focused on expanding its lending book, launching new innovative products, and progressing towards its bank license.

Publicly listed retail fintech companies also performed well in 2024. PitchBook’s index of public neobanks, brokers and crypto cohort outperformed the broader market in Q4 2024, posting a median return of 81.2% compared with 3% for the S&P 500 and 7.7% for the Nasdaq.

According to PitchBook, this underscores improved profitability and sustained growth, reflecting improved unit economics and more resilient operating models.

Outlook for 2025

PitchBook anticipates continued momentum in 2025, driven by revived exit activity and continued capital flowing into retail fintech companies. Key trends to watch include AI, cross-border payments, and global expansion.

Exit activity in retail fintech, while muted in 2024, saw some bright spots. In December, the Upbound Group bought Brigit, a financial wellness monitoring app, for US$460 million. In India, payment startup MobiKwik went public on the National Stock Exchange of India in December, with an initial public offering (IPO) oversubscribed by nearly 120 times.

Looking ahead to 2025, several high-profile companies have already made plans to go public, hinting at a busy year for retail fintech exits. Swedish buy now, pay later (BNPL) giant Klarna filed in November IPO documents with the US Securities and Exchange Commission (SEC). Similarly, Chime Financial, a San Francisco-based fintech company known for its fee-free banking services, is making strides towards its public debut, having reportedly enlisted Morgan Stanley to lead its IPO with a 2025 launch target.

According to PitchBook, a recovering IPO market and increased M&A activity could restore liquidity to investors in 2025. This would encourage more investment activity in retail fintech.

Finally, the report highlights retail fintech trends to look out for in 2025. It expects AI to continue to be a driving force for innovation in retail fintech this year, with companies such as Revolut, Robinhood, Bunq, and Public already exploring how AI assistants can optimize for consumer needs. Others such as Intuit and Bud are also working on agentic AI applications to create a more efficient, personalized and user-friendly experience for their customers.

Agentic AI applications are systems designed to autonomously perform tasks or make decisions without human intervention. These AI agents operate independently, perceive their environment, reason about it, and take actions to achieve specific goals.

2025 will also see retail fintech companies accelerate their international expansion, building on significant moved in 2024. US BNPL provider Affirm launched in the UK in November, its first expansion overseas. In China, fintech giant Ant Group doubled down on global push, expanding its presence into Europe, Latin America, and the Middle East.

Finally, competition for capturing cross-border payments share will continue to grow in 2025, driven by booming international transactions last year. Alipay+ reported that its cross-border transactions tripled in 2024.

Featured image credit: edited from freepik