Can fintech’s brightest stars shine on Wall Street?
Klarna and Chime are finally ready to test the public markets, likely this year. The Swedish buy now, pay later (BNPL) firm and the US neobank have reportedly confidentially filed in late 2024 for IPOs, marking two of the most anticipated fintech public debuts in recent years.
But with shifting market conditions, a new administration in the White House, and a mix of investor excitement and skepticism, these IPOs could either be fintech’s grand return to Wall Street — or another cautionary tale.
The possibility of an IPO for Revolut and Stripe has also been brewing since 2023, but neither company is ready to seal the deal just yet.
The case for going public
For Klarna and Chime, the timing makes sense — at least on paper. Markets have started 2025 with a bullish streak, fueled by cooling inflation, a rebounding IPO pipeline, and a government that appears friendlier to fintech innovation. However, alongside that enthusiasm come fiercer competition and sharper investor scrutiny.
After a turbulent couple of years, Klarna has been eyeing a public listing. Its valuation plummeted from a $46 billion peak in 2021 to around $6.7 billion in 2022 before rebounding to an estimated $15 billion. Going public could help Klarna raise fresh capital, expand further into the US, and compete more strongly with rivals like Affirm and Apple’s Pay Later service.
As for Chime, with over 20 million customers, it is one of the biggest digital banking players in the US. However, it hasn’t raised funds since 2021, when it was valued at around $25 billion. A public listing could provide it with capital to fuel growth and potentially diversify beyond its core product offerings, which include a fee-free digital banking experience.
The aspirations and tactical execution
The post-pandemic era has turned IPOs into a proving ground rather than a victory lap. Companies can no longer bank on hype alone — they need solid profitability, sustainable growth, and a narrative that withstands intense scrutiny. The Federal Reserve’s tighter monetary policies, global market volatility, and the shift from a liquidity-driven to a fundamentals-driven investment climate are creating higher entry barriers.
Both Klarna and Chime will be entering a relatively less forgiving market and heightened investor concern than in 2021, a year that saw 61 fintech IPOs — far more than the 16 that have launched in the past three years combined.
Last week, I teased a mystery topic, letting you stew in curiosity about what was coming. Well, the wait is over! Given that Valentine’s Day was just last Friday, I’m leaning toward a theme that fits the season: unions & collaborations.
We often dive into stories of partnerships that start with fireworks and flawless roadmaps — only to crash and burn for one reason or another. But today, let’s moonwalk through this. Let’s talk about rivals who went from side-eyeing each other to shaking hands (at least in the business world).
Take banks and fintechs, for example. Their early days were more ‘battle for dominance’ than ‘let’s work together’ — fintechs painted themselves as challengers, while banks saw them as pesky invaders. But time and market realities have a way of reshaping narratives.
Now, banks and fintechs are increasingly recognizing their strengths. It’s a classic ‘you complete me’ scenario — if corporate romance were a thing.
Graphic credits: Tearsheet
But let’s hit rewind for a moment. How did these once-feuding forces go from wary opponents to strategic allies? And where do these kinds of relationships stand now?
Let’s dig in.
Block vs. J.P. Morgan Chase: From competition to cooperation
J.P. Morgan Chase initially saw Square (now Block) as a major small-business payment competitor. In 2014, CEO Jamie Dimon famously warned that Silicon Valley was “coming to eat our lunch.” Square’s success with small business payments and its Cash App product placed it in direct competition with Chase’s merchant services.
Funding Circle is a leader in a pack of new financial companies bringing increased scale and online convenience to the world of SMB lending. While traditional banks have shied away from expanding their credit operations, companies like Funding Circle have filled in the gaps, working closely with SMB borrowers to provide them needed credit, quickly and efficiently. Funding Circle has shown its intention to grow globally.
Tradestreaming sat down with Sam Hodges, co-founder of Funding Circle, USA, to get caught up on the company’s progress in light of a recent acquisition it made in Germany.
Why did you found Funding Circle?
Over the past few decades, banks have largely pulled out of small business lending due to tighter regulations and archaic credit models and technology that make it difficult for them to profitably underwrite small business loans. This has left millions of small business owners without access to the financing they need to grow – something I actually I experienced first-hand.
Sam Hodges, Funding Circle USA
Along with a few business partners, I owned a successful network of fitness businesses – but getting access to capital was a horrible experience. We had a great financial profile, strong personal guarantors, extensive experience and a profitable business. Yet, we could not secure a loan to purchase new equipment to expand. We talked to almost one hundred different lenders and were either turned down or offered terms that simply didn’t make sense. The irony was, when my co-founder and I were working on Wall Street, we saw bankers lining up around the corner to give out $100 million loans for higher-risk businesses. That’s when we realized the traditional banking system was broken, and we set out to build a better solution.
Why is Funding Circle better than current solutions? How do you think your firm differentiates itself from the numerous competitors popping up?
The traditional banking system is broken and restricted by legacy issues, and many online lenders are either expensive or incredibly transactional, relying solely on computers to make credit decisions. At Funding Circle, we think small businesses deserve better.
We are the world’s leading global marketplace for small business loans and have been built from the ground up to help small businesses secure the funding they need to grow. Using technology to cut out the middlemen who take advantage of information asymmetry, we connect supply directly with demand for a fraction of the cost.
Unlike other lenders, we take a customer-first approach to create an experience that is fast, simple and very transparent. We also believe businesses are more than their credit score, which is why we layer human underwriters with our innovative technology and proprietary data analytics to look at the full picture and better assess the creditworthiness of a loan. It takes just 10 minutes to apply for a loan, and businesses can get affording financing in less than 10 days.
Can you give us a feel for the progress you’ve made in the business over the past couple of years (quantify it)?
Our business, along with the marketplace lending industry, has experienced tremendous growth over the past couple of years. Since 2010, we’ve helped more than 12,000 small businesses across the world access $1.6 billion in financing to help them grow, hire more people and ultimately stimulate the economy. Globally, we’re currently originating ~$100 million per month, and have 43,000 individual and institutional investors active on the marketplace.
One thing I’m particularly excited about is a groundbreaking deal we announced a few weeks ago to help millions of businesses across Europe sidestep the outdated banking system and borrower directly from investors, too. Last month, we joined forces with Zencap (now operating as Funding Circle) – continental Europe’s leading marketplace for business loans – to create the first truly global marketplace lending platform. We now operate in Germany, Spain and the Netherlands, alongside our existing operations in the UK and US. The market opportunity across continental Europe is larger than both the UK and US markets combined, with more than €1 trillion of outstanding loans for small businesses.
On the partnerships side, last year in the UK we became the first marketplace to announce a formal referral partnership with Santander and have since announced a similar partnership with RBS. In the US, we’re in active talks with a wide range of banks and other lenders about how we can work together and are looking forward to announcing something soon.
Since launch, we have raised $273m in equity capital from the same investors that backed Facebook, Twitter, Airbnb and Wealthfront. And as of today, Funding Circle now has nearly 500 employees across the UK, the US and Continental Europe.
You just acquired Zencap which provides a foothold for further access into Europe. How do you think about international expansion?
Our vision for Funding Circle is as a global lending exchange, where business from all over the world come to find finance from an army of investors, big and small. Small businesses are underserved in most of parts of the world, and we believe our marketplace model can help millions of businesses and investors to get a better deal. At the moment, we are focusing all of our energy on building a successful business here in the UK, USA and Europe.
Who’s a typical borrower for Funding Cirlce? How about a typical investor?
Walk down Main Street in any American town, and you’ll see examples of our borrowers. They are restaurateurs, gas stations, medical clinics, construction firms and IT consultants. These are established businesses that have assets and cash flow to secure loans, and a legitimate plan for growth. More specifically, our borrowers have typically been in business for around ten years, have annual revenue of $2 million and employ about 10 people. On average, small businesses borrow $130,000 for 36 months and use their loan for expansion and growth.
On the investor side, we’ve seen really strong appetite for our loans from a wide range of investors of all shapes and sizes. In the US, our investors range from individual accredited investors and family offices to large global asset managers like Victory Park Capital and KLS. Looking forward, we’ll continue to see an evolution and diversification in our investor base as we look to continue to bring down our cost of capital to offer even better rates and products for our borrowers.
What are Funding Circle’s challenges in the near future? What are the industry’s challenges?
Education and awareness remains a key focus for our industry. The most powerful marketplaces bring together the largest number and diversity of participants across a breadth of products and geographies. Our goal is to be the leading global marketplace for the full gamut of small business loan products worldwide. As a company and an industry, though, we still have a way to go in terms of raising awareness that there are other forms of financing out there that are fast, affordable and transparent alternatives to bank loans and MCAs.
We took a big step in this direction when, this summer in Washington DC, we partnered with other industry leaders to unveiled the first-ever gold standard for responsible business lending in America. As part of the initiative, we launched a national campaign to help educate small business owners about their rights as a borrower and how to find and compare different financing options.
Over the next few years at Funding Circle, we will continue to spread the word about the benefits marketplace lending and invest heavily in technology and talent to help us continue to build a transparent, sustainable and diverse marketplace.
