we were optimists in fintech when we launched the Matrix Fintech Index in 2017, but even we underestimated the magnitude of growth to come. The tailwinds for fintechs, strengthened by the COVID-19 pandemic in 2020, only accelerated in 2021. And despite the difficult start to public markets in early January, we are confident that 2022 will be another landmark year for the industry.
In this year’s edition of the Matrix Fintech Index, we will analyze the performance of public fintechs against the broader market in 2021 and reflect on the hot year for the private fintech market. Then we will turn our attention to next year and make some predictions for fintechs in 2022.
Fintech continued to outperform the market by 3x
The Matrix Fintech Index significantly outperformed major public equity indices as well as a basket of legacy financial services providers for the fifth year in a row. As a reminder, the Matrix Fintech Index is a market capitalization weighted index that tracks a portfolio of top 25 public fintech companies.
Despite a decline of around 30% in the final months of 2021, the Matrix Fintech Index continued to outperform the broader market as well as incumbent financial services companies. Fintech’s consistent outperformance signals that the changes brought about by COVID-19 – including shifts towards e-commerce, online payments and digital versus physical interactions – are here to stay.
January 2022 opened with shaky markets and signs of multiple compression, but we believe this year will set another record with at least $300 billion in fintech liquidity.
A great year of public debuts
The past year has been an excellent one for fintech IPOs, with notable debuts taking place across multiple categories. Consumer companies like Coinbase ($86 billion) and Robinhood ($32 billion), infrastructure players like dLocal ($6 billion) and Marqeta ($15 billion), and insurtech providers like Lemonade ($1, 6 billion) entered the public market.
There was also greater diversity in how these companies went public, with some fintechs completely bypassing the traditional IPO process. More companies, such as Coinbase in the US or Wise in the UK, chose direct listings, while Robinhood allocated $700 million worth of shares to its existing clients.
Others, including Hippo, Metromile and SoFi, chose to go public via SPAC. While the histories of SPACs have been mixed, even taking into account recent market volatility, the rise of IPO alternatives is a welcome change for the growing ranks of late-stage fintech unicorns.
A record year with 151 new unicorns
Private markets followed public markets in making 2021 a record year. Venture capital funding at private fintech companies surpassed $134 billion in 2021, up 177% from the previous year, according to Crunchbase.