2021 has been a crazy year for stocks making initial public offerings (IPOs). Several renowned fintechs made their public debuts in 2021, including Global Coinbase, Robinhood Markets, Marqueta, and others.
Last year was the strongest IPO year on record, with more than 2,388 transactions completed this year for a total of $ 453 billion, according to accounting firm Ernst & Young.
While experts believe the IPO markets will cool down next year, several private unicorns have yet to make their public debut. The three huge fintechs I’m looking at in 2022 are Stripe, Plaid, and Chime. Each has a private valuation exceeding 10 billion dollars.
Stripe is a fintech bringing payments into the digital age. The company helps process payments and credit card transactions for businesses on the Internet.
Stripe is used globally by millions of businesses in 120 countries. Businesses using its payment technology include Amazon, Alphabetit’s google, Shopify, and Spotify, to only cite a few. It calls itself the “Internet payment infrastructure”, using an application programming interface (API) to achieve it.
Bringing payments into the digital age means businesses can process funds quickly and securely. For example, Stripe can protect businesses from fraudulent transactions by checking customer account balances before completing a transaction. This is just one of the many reasons businesses turn to Stripe for their payment solution. Stripe makes money in a number of ways, but most of its income comes from payment processing fees, which average around 3%.
In March 2021, Stripe raised more than $ 600 million in funding, which it invested to expand its European reach. The fundraiser also earned it a valuation of $ 95 billion, making it the largest private fintech in the world.
Investors are eagerly awaiting Stripe’s public debut. Bloomberg reported in September that the payments company was in talks with investment banks to go public in early 2022. However, co-founder John Collison said CNBC in November that “we are very happy as a private company”. Either way, investors are eagerly awaiting the Stripe IPO, which will likely be one of the biggest IPOs ever.
Plaid is another fintech that brings payments into the modern era. While Stripe aims to make transactions easier for businesses, Plaid makes it easier for customers to connect their bank accounts to different financial apps. For example, when you connect your bank account to Pay PalIt’s Venmo, Chime Financial, or Robinhood to quickly transfer funds, you’re probably using Plaid technology.
Plaid makes it easy for users to make transfers by simply logging into their bank account through the app they are using. Previously, customers would enter information like their bank account number and routing number and then wait days before transferring funds.
Plaid is free for those who use it, so how does it make money? Plaid makes money from the businesses it connects its customers to. For example, if you connected your bank account to Coinbase, Coinbase would pay a fee to Plaid because it made this transfer easier.
Plaid’s last round of funding was completed in April 2021, for a total of $ 600 million. This round of funding gave Plaid a rough valuation of $ 10 billion to $ 15 billion.
Like Stripe, Plaid is in no rush to go public. A failed acquisition in 2020 by Visa due to antitrust concerns suggests that there is a lot of interest in the company. A spokesperson for the company said Barronis back in April that “with $ 600 million, [Plaid] can be independent for a long time. However, it might not be bad for the company to strike while the iron is hot, and 2022 could be that time.
3. Financial Chime
Chime Financial is a company that seeks to provide banking services to all types of customers, focusing on those underserved by traditional banks. Chime partners with regional banks to design financial products for customers, creating a competitive market with low-cost options for ordinary Americans.
The company focuses on underserved markets and encourages “no-charge” banking services to its customers. It doesn’t charge overdraft fees, monthly service fees, or minimum account balance requirements. Chime believes that “everyday banking and payment services should be useful, easy and free,” and in addition to its toll-free banking model, it also offers 60,000 toll-free ATMs across the country.
Every time customers swipe a Visa or other card, businesses have to pay those businesses transaction fees ranging from 0.5% to 5%. It is through these fees that Chime earns its money. The company is a Visa partner and earns money from a portion of the transaction fees Visa charges merchants when customers use their Chime debit card.
In August 2021, Chime raised $ 750 million in funding, giving fintech a valuation of $ 25 billion. At this valuation, Chime is the third most valuable private fintech in the world, behind Stripe and the Swedish buys now, later pays the Klarna company.