Latest report from KPMG and CB Insights on the health of fintech venture capital (VC) investment highlights a second consecutive quarterly drop in deals and dollars
After quarterly fintech investment to VC-backed companies peaked as high as US$5B+ in 2015, investors continue to take a much more cautious approach this year according to the Pulse of Fintech, the quarterly report on global fintech VC trends published jointly by KPMG International and CB Insights.
Fintech funding levels in Germany outpaced the UK in Q3 for the second consecutive quarter, with 35% more funding raised by German-based VC-backed fintech companies than those in the UK. Germany’s fintech market received US$105 million versus the UK’s US$78 million.
Q3’16 saw both European fintech deals and funding fall quarter-on-quarter. European fintech funding fell 43% to US$233M whilst globally it fell 17% to US$2.4B over the same period. In Asia, we saw the reverse as funding increased 50% to reach US$1.2B.
Notably, Europe has not registered a single US$50m+ mega-round so far in 2016 whilst Asia saw $50M+ fintech rounds stay level at 4 deals, for the fourth straight quarter.
“This quarter, Asia outpaced North America in terms of fintech funding – a major shift from historical norms,” says Warren Mead, Global Co-Leader of Fintech, KPMG International. “The US and the UK bore the brunt of market uncertainties. With investors watching both the aftermath of the Brexit vote and the run up to the US election, it’s not surprising that many in Europe and North America took a pause. 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.”
Anand Sanwal, CEO of CB Insights, adds: “While we continue to see significant investment into fintech companies globally, the euphoria for mega-deals that we saw into the latter half of 2015 has waned. Total investments to key areas like marketplace lending and blockchain technology have both seen declines heading into the tail-end of 2016.”
Key highlights from the Pulse of Fintech:
Corporates stay active in fintech
Corporates participated in 30% of global VC-backed fintech deals for the second consecutive quarter in Q3’16, driving a significant amount of fintech deals activity globally. Citigroup, Banco Santander and Goldman Sachs have made over 20+ fintech investments in total over the past five quarters, while a host of insurers have launched corporate venture arms.
“Fintech funding is down this quarter, but it no way reflects a lack of interest among investors, particularly corporates who see fintech as a way to leapfrog ahead of the competition. In Q3’16, corporate venture capital participation in global deals to VC-backed fintech companies reached 30% for the second consecutive quarter” says Brian Hughes, Co-Leader, KPMG Enterprise Innovative Startups Network and Partner, KPMG in the US. “This interest will continue to grow as corporates are looking to take advantage of the opportunities fintech provides.”
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KPMG’s Financial Services practice has launched the global fintech practice in order to leverage international investment activity and capability development in fintech across KPMG member firms. Warren Mead and Ian Pollari, partners with KPMG in the UK and KPMG in Australia respectively, have been appointed as global co-leads of the practice, along with a leadership team including partners from countries including the U.S., U.K., Israel, China & Hong Kong, India and Australia.
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