Following the footsteps and eye-catching post on LinkedIn by Efi Pylarinou, I wanted to dig deeper into the valuation of the world's top private fintechs.
Analysis
Takeaways:
- By using a metric of valuation per customer, Stripe, and OakNorth tower above the other FinTechs! It pays to be profitable when you go fundraising.
- Stripe wins on valuation per customer but hidden behind the numbers are the billions worth of transactions that it processes.
- OakNorth is a Neobank with a banking license- it does say something about running a full-stack digital bank with a lower cost to income ratio and lending to an under-served business segment (Small businesses). It is the second most profitable in terms of net income per customer.
- If you look at the year when these fintechs were founded- it seems there was something intriguing happening between 2010 to 2013. Perhaps it was the period close to the great financial crisis of 2008 that created a slew of Fintech Startups. It took about 7-10 years to develop valuable Fintechs
- The numbers for Chime/ Robinhood and Affirm are an estimate, which is unclear if they are profitable. Its shareholders are incredibly patient. In the case of Affirm, it pays to be an Ex-PayPal founder. In the case of Robinhood, an IPO may be the only way to return funds to the VCs.
- Klarna: Is focused on growth, and the funding seems to be directed at customer acquisition and geographical expansion and reflected in the profitability figures for last year. The Buy-Now Pay-later juggernaut continues its dominance.
- Nu Bank in Latin America's biggest Fintech is probably undervalued, given its customer base and potential for growth in South America.
- SoFi has diversified from being a student's loan provider to provide more services such as trading and personal loans. Seems to have paid off in profitability but not in valuation
- Paytm with its vast 350 Million customer base, is still not profitable, showing how expensive customer acquisition and marketing is in the Indian market.
Caveats:
These fintechs each have a different business model. These are pre-pandemic numbers and do not include the spike in numbers that some fintechs such as Robinhood have enjoyed. Some are Payment processors, and others are neo banks. Stripe has a B2B business model, so comparing it to B2C fintechs is not apple to apples. The numbers are derived from various sources- Wikipedia, company websites, Investopedia, CNBC. As far as possible, I have taken financials for the year ending 2019, except in the case of Sofi.
As more of the fintechs file for their IPOs, their actual revenue and profitability will get reported out and permit more accurate analysis.
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