While VC interest in fintech companies remains high around the globe, market uncertainty has caused many investors to take a conservative approach in Q3’16.
Both the number of deals and total value of VC investment in fintech dropped in Q3’16 due, in large part, to the lack of $1 billion+ mega-deals. The total dollars invested this quarter was also less than half of that seen in Q3’15.
Despite quarterly decreases, the view of year-to-date fintech investment shows a positive trend. While VC-specific funding isn’t expected to exceed 2015’s peak investment levels, total funding to fintech companies is on track to exceed 2015 totals. This shows that while VC investment in fintech has fallen this year, fintech is still a high priority for the investment community as a whole.
Regionally, Asia is on track for a record-breaking year for VC investment in fintech. Q3’16 was Asia’s time to shine, with an increase in VC funding from $800 million last quarter to $1.2 billion in Q3. China-based fintech companies have done particularly well this quarter.
In contrast, both the US and the UK experienced weaker activity due, in part, to continued market uncertainty resulting from the Brexit vote and the ongoing US presidential election cycle. In the US, smaller deal sizes resulted in a quarterly investment of under $1 billion, though the total number of deals remained high. In Europe, the UK, a traditional fintech powerhouse, saw decreases in both the number of deals and total investment, while the German fintech sector is now on track to outperform the UK this year.
As in past quarters, payments and lending remain the leading fintech subsectors across the globe and continue to earn considerable VC attention despite signs of market saturation in some subsectors. Other areas, including RegTech, blockchain, data and analytics and InsurTech are on the rise.
Source : KPMG