3 minute read 13 Sep 2021

Deal value soared in Q2 2021, led by a surge of investment in European payment service providers.

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How alternative payments are driving venture capital investment

EY Global
By EY Global

Ernst & Young Global Ltd.

3 minute read 13 Sep 2021
Related topics Banking and capital markets Payments
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  • Venture capital transaction overview Q2 2021 (pdf)

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  • Venture capital transaction overview Q1 2021 (pdf)

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  • Venture Capital Transaction Overview Q4 2020 (pdf)

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  • Payments Venture Capital activity transaction overview Q3 2020 Final (pdf)

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Deal value soared in Q2 2021, led by a surge of investment in European payment service providers.

In brief
  • Venture capital investment in payments globally rose 62% in Q2 2021, though the volume of deals dropped 5.4%.
  • Targets of the top three deals were Europe/UK-based alternative payments providers and processors.
  • Expect investment to continue to grow in 2021, with possible IPOs later this year.

Payments venture capital Q2 2021 at a glance:

  • There were 123 venture capital (VC) deals.
  • The total VC deal value was US$8.7b.
  • US$790.9m investment in Mollie B.V was the biggest VC deal of Q2 2021.
Venture capital deal Q2 2021

Dutch payments services provider attracts most Q2 funding

VC interest in alternative payment systems remained high in a quarter where we saw deal value soar by 62%, despite a marginal decrease (5.4%) in deal volume. The share of early-stage investment (venture, seed and series A funding) of the quarter’s total volume of deals increased from Q1.

No of deals by funding stage

While alternative payment systems deals dominated, accounting for 42% of transactions, investors were also attracted to payment acceptance devices (18% of deals) and money transfers (15% of deals).

It was a payments service provider (PSP) – Mollie B.V – which attracted Q2’s biggest deal. The Netherlands-based company raised US$790.9m in Series C funding led by Blackstone Group and other investors. Mollie B.V says the investment will fund international expansion and investment in more innovative products and engineering.

Swedish-based payment and shopping solution provider Klarna was the target of the quarter’s second biggest deal. The US$639m investment round, led by Softbank Vision Fund and investors including Westcap and HoneyComb Ventures, will enable Klarna to continue to expand abroad and capture global retail growth.

The third biggest investment this quarter was the US$500m investment in UK-based payment processing service provider company, Salt Pay Co ltd. The round was led by Tiger Global Management.

North and Central America were the hub of VC deals in Q2, attracting 40% of investments in terms of both volume and value. Europe attracted 25% of deals and 30% of value, while Asia accounted for 19% of deals and 20% of value. The Middle East and Africa hosted 9% of deals. South America attracted 8% of deal value.

Investment by region Q2 2021
Investment by sectors Q2 2021

VC investment trends

For the remainder of 2021, we expect to see two key trends shape VC investment:

  • Rising levels of VC investment in payments as interest rates stay low and with few attractive alternatives to offer.
  • IPO activity tipped to increase toward the end of 2021 if inflation stokes fears of interest rate hikes and puts pressure on investors to exit. As well as more IPOs, we could also see a further pick-up in special purpose acquisition company (SPAC) deals.

How EY can help

Payment services

The EY Payments team serves payments suppliers (e.g., banks, credit unions, networks and PayTechs) and consumers of payments services (e.g., retailers, health care companies and other enterprises). Bringing insights from both sides of the payments ecosystem, our solutions are designed to deliver innovation, growth and higher performance, ultimately driving better outcomes.

Read more

Show resources

  • Download the venture capital transaction overview, Q2 2021.

    pdf (2 MB)

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Summary

Payments, particularly alternative payments providers, continue to appeal to venture capital investors in a low interest rate environment.

About this article

EY Global
By EY Global

Ernst & Young Global Ltd.

Related topics Banking and capital markets Payments
Upvote