Fintech investments on the rise after challenging 2016

8 years ago - Published in Finance, Fintech Land, Fundamental Analysis

Fintech is taking the world by storm, and investors are starting to notice.  While 2016 was dubbed what some might say as “challenging” for the fintech market, overall investment in fintech totalled $24.7 billion, according to KPMG. That figure is impressive enough on its own, but it pales in comparison to the $46.7 billion invested in 2015.

As KPMG suggests, 2016 was a “challenging year for fintech investment,” with thanks to the Brexit vote and circumstances surrounding that outcome. The US presidential election was also a contributing factor, while there was also a slight slowdown in China.

More specifically, in the US, investment in fintech dropped to $12.8 billion in 2016–a significant decrease from $27 billion in 2015, the KPMG report states. The research firm highlights that the overall decrease in investments came from a decline in merger and acquisitions (M&A) and private equity deals, while venture capitalist (VC) deals soared to a new high of $13.6 billion compared to $12.5 billion the previous year.

That said, fintech deals in Asia were on the rise in 2016, reaching a new high of $8.6 billion compared to $8.4 billion in 2015. Fuelling that growth came in part due to three “mega-rounds” accounting for more than half that growth.

Meanwhile in Europe, fintech investment took a slight in 2016, with a total of $2.2 billion invested in 318 deals.

Still–there is good news for the fintech market. Global investment in fintech is poised to reach $46 billion over the next three years.

While it’s certainly good news that the fintech market is expected to grow and become a well established industry, currently the sector market is in a nascent stage. The relative immaturity of the market suggests that investors will see significant growth in this area.

For instance, the first quarter of 2017 in the fintech market saw $3.2 billion in global investments, as per KPMG’s Q1 edition of “The Pulse of Fintech.”  Over in Europe, roughly $610 million in 67 deals has been invested, resulting in a record quarterly high, KPMG states. However, Asia has taken a step back, with $406 million in venture capital funds.

“In the US, the UK, China and other jurisdictions, fintech investors are starting to focus more on performance and return on investment than ever before – pressuring fintechs to demonstrate scalability and a clearer path to profitability,” Ian Pollari, Global Co-Leader of Fintech, KPMG International, said.

Pollari further stated that fintech companies are coming onto the scene in places one might not expect–like in Poland and Slovakia–which could be the surprising boost the fintech sector needs moving forward.