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Thursday 18 January 2018

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Venture capital FinTech investment on the decline

Written by Anthony Strzalek
16/11/2016

Global venture capital (VC) backed FinTech investment has declined in the third quarter of 2016, despite Asia investment reaching a new high.

New figures released by KPMG and CB Insights, as part of their Pulse of FinTech report, have shown a second consecutive quarterly drop in FinTech deals and dollars.

Global FinTech funding fell 17 per cent in Q3 2016 to $2.4 billion, while deal activity fell 12 per cent to 178 deals. Overall global investment in FinTech companies across both venture-backed and non-venture-backed companies totalled $2.9 billion in Q3 2016.

However, while the number of VC-backed FinTech deals dropped to a five-quarter low in Asia, funding increased 50 per cent on a quarter-over-quarter basis to reach $1.2 billion, up from $800 million in Q2. Year-to-date results suggest Asia-based FinTech investment for 2016 could top last year’s peak investment results.

Warren Mead, global co-leader of FinTech at KPMG International, said: “This quarter, Asia outpaced North America in terms of FinTech funding – a major shift from historical norms. The question is whether Asia will continue to set the pace headed into 2017. With the diversity of investments and widespread support for the growth of FinTech hubs in the region, it’s a very distinct possibility.”

The report also found a global decline in deal size. Despite Asia seeing $50 million-plus FinTech rounds stay level for the fourth straight quarter, Europe currently has not registered a single $50 million plus round to a VC-backed FinTech company in 2016.

Q3 2016 saw European FinTech deals fall 17 per cent quarter-over-quarter as FinTech funding in Europe dropped 43 per cent over the same time period to $233 million. Germany outpaced the UK in terms of FinTech funding for the second consecutive quarter, with 35 per cent more funding raised by German-based VC-backed FinTech companies than those in the UK.

The report indicated that payments and lending remain the leading FinTech subsectors despite signs of market saturation. Meanwhile, other areas including RegTech, blockchain, data and analytics and InsurTech are on the rise.

Brian Hughes, co-leader of the KPMG Enterprise Innovative Startups Network, added: “FinTech funding is down this quarter, but it in no way reflects a lack of interest among investors, particularly corporates who see FinTech as a way to leapfrog ahead of the competition.

“In Q3 2016, corporate venture capital participation in global deals to VC-backed FinTech companies reached 30 per cent for the second consecutive quarter. This interest will continue to grow as corporates are looking to take advantage of the opportunities FinTech provides.”



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