Digital banking startups have attracted record levels of funding as they disrupt traditional consumer banks, with over $2.1B invested in 2014 and over $6.5B invested in 2015 year-to-date.
We used CB Insights data to break out digital banking deal and dollar shares by country and US states. Our analysis reveals the increasingly global scope of digital banking investment, with markets outside the US accounting for more than half of annual deals for the first time.
Deals and dollars trending international
Funding to digital banking startups has a significant international profile, with markets beyond the US representing 44% of all deals.
Behind the US’s 56% deal share, China ranked second with 9%, followed by the UK at 8%, and India at 4%. As we’ll see later in this brief, recent deal growth in these 3 countries has been especially strong.
The remaining deals were widely dispersed, with no other country seeing more than 2% of the global total.
Digital banking funding dollars were more concentrated, with the same top four countries accounting for 88% of the total (versus 77% in deal terms). The US share of funding came in at 49%, with international startups receiving just over half.
China ranked second again, more than doubling its deal share at 19% of global funding. The high ratio of dollars-to-deals reflects a rash of Chinese mega-rounds in 2015. The largest include Lufax’s $485M private equity financing in April, followed by Juixin Finance’s $322M private equity funding in May, and DianRong’s $207M Series C in August. All three companies focus on peer-to-peer lending services.
International funding in digital banking a recent phenomenon
Absolute deal counts have risen with the tide across regions, but the emergence of European and Asian banking startups have driven a recent shift in the geographic mix. The share of digital banking deals outside the US has marched steadily upwards since 2010, coinciding with the explosion of overall activity in the space.
US-based startups commanded 75% of global deal share in 2010, but the US share has since dipped to 52% in 2014 and 47% in 2015 year-to-date.
Within US, investments concentrated in California and New York
- California has dominated US digital banking deal activity, rising from 10 deals in 2010 to a peak of 32 in 2014.
- New York consistently ranks second, also peaking in 2014 with 14 deals.
- Washington state came in a distant third, but saw at least 1 deal in every year since 2010.
China, UK, India lead international growth
Outside of the US, three markets — China, the UK, and India — have seen the most explosive deal growth, especially since 2013.
- China leads all international countries with 39 deals done since 2010, 30 of which have come since the start of 2014. P2P lending has been an especially hot area for Chinese startups. Besides the mega-rounds mentioned above, P2P lenders Meili Jirong and Kaixindai also raised Series A rounds of $65M and $34M in Q4’15.
- The UK has seen steady growth since 2010, ranking second with 34 deals since 2010. Notable UK banking startups include Atom Bank, a mobile-only bank that raised a $128M Series B in November and P2P lender Zopa (the latter raised a $106M Series F on 12/15/2015, not included in this 12/10/2015 YTD data).
- India saw only 5 total deals from 2010 to 2014, but accounted for 13 in 2015 alone. A $680M corporate minority round in September went to One97 Communications, which offers underbanked consumers bill pay and mobile banking services.
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