Listed fintechs’ earnings highlight impressive growth, but it’s been a bumpy year for insurtechs

What we’ve noticed: A record number of fintech companies have gone public, which means they now have to publish their quarterly earnings. Their reports offer us a temperature check on the industry.

Fintech earnings highlights: A number of listed fintechs are on track to beat their 2020 revenues, and some have already done so. But the net loss for many has widened.

  • API issuer-processor Marqeta’s net revenues of $122 million in Q2 were up 76% year-over-year, while its net loss reached $68,554, up from $7,107 the same time last year.
  • Digital cross-border payments fintech Flywire grew revenues 56% YoY to $37 million in Q2, while net loss came to $18.1 million, compared with $16 million in Q2 2020.
  • Ahead of its public listing, Robinhood reported it reached $522 million in revenues for Q1, more than half the $959 million for all of 2020. But net losses reached a whopping $1.4 million, from $52,502 last year.
  • Coinbase stands out for actually generating a profit. It reported $2.23 billion in revenues, up from $1.3 billion for all of 2020. It also recorded net income of $1.61 billion, up from $32 million in Q2 2020.

Looking ahead: Fintech exit momentum shows no signs of slowing down as more startups seek to emulate their predecessors’ rapid growth.

Just 88 fintechs accounted for 70% of global fintech funding in Q2, leading to a record number of startups reaching sky-high valuations. The VCs will likely encourage them to go public to capitalize on the current fintech hype and make lucrative exits—whether or not they experience widening losses. In addition, a surplus of available SPACs is competing for acquisition targets—meaning fintechs can potentially shop for the best deals to take them public. KPMG expects that H2 will see an increase in SPAC acquisitions focused on unicorn and near-unicorn fintechs.

Zooming in on insurtechs

Troubled waters: It hasn’t been smooth sailing for publicly listed insurtechs, which have had a controversy-ridden year.

  • Root’s and Metromile’s underperformance on the market has raised concerns over insurtech valuations.
  • Root also faces a class action lawsuit from investors claiming its IPO downplayed how long it would take for the firm to generate positive cash flow.
  • Clover Health, which went public via a SPAC in October, was investigated by regulators this year for allegedly withholding information from investors.
  • Hippo lost 83% of the capital raised by its SPAC, as investors withdrew funds before it went public.

Oscar Health stands out as an exception—its Q2 earnings report mirrors that of the fintechs we discussed earlier. The US-based health insurtech shared strong revenue growth, hitting $723,927 on the back of a 44% direct policy premium bump, while its losses widened. Its medical loss ratio—which measures the portion of premiums income insurers pay out through health care claims—reached 82.4%, from 60.7% in Q2 2020.

Looking ahead: The controversies may make insurtechs more cautious than other fintechs when deciding whether to go public—especially after seeing Hippo’s loss. They may rather rely on record-setting levels of private funding to keep fueling growth.