Financing activity to the payments space is growing 25% annually on the back of a boom in early stage financing activity
Payment tech firms, which cover a wide range of technologies ranging from payments processing to digital wallets to point of sale devices, have received over $780 million of investment in the last year across 140 financing deals.
These new firms are seeking to disrupt the traditional methods of moving and transacting with money through technologies including:
- Mobile Payments – Mobile payments technologies utilize the extensive penetration of mobile phones in society to allow customers to use these cell phones as extensions of their wallets.
- Hardware Solutions – These solutions focus on improving traditional point-of-sale terminals in brick and mortar stores and fall primarily in two camps: NFC (near field communication) and mobile point-of-sale technology.
- Money Transfer – Money transfer services involve the direct movement of money internationally.
- Services for the Underbanked – A large portion of the world’s population does not have access to traditional banking or payment solutions and represents a massive opportunity for organizations who are leveraging solutions such as prepaid cards, cash-based services and direct mobile billing.
- Transaction Processing – Transaction processing includes both traditional point-of-sale payment processing and card not present processing.
There has been an almost 25% annual growth rate in deals and a 12% annual growth rate in funding over the last five years. There are, on average, 24 deals and $24 million in funding per quarter.
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While deal activity into the payments space has climbed, funding from quarter to quarter has not grown quite as much. While there were spikes in funding during a few quarters, these were driven by mega-financings to the likes of Square and Klarna. In fact, the vast majority (~68%) of deal activity in the space over the last five years have been at the seed and Series A stages which are typically much smaller (average transaction sizes of $0.93 million and $5.84 million, respectively) .