CB Insights and KPMG just released their Pulse of Fintech report for Q2 2016. In the second quarter of the year 195 deals have been completed with a total investment of $2.5bn.
The report is available for your viewing pleasure at the end of the blog.
The key areas focused on in the report
- What areas of fintech are gaining momentum around the world?
- How is the definition of fintech continuing to evolve?
- What are the recent developments around regulatory frameworks?
- What is driving VC investment in InsurTech?
The summary of the report
In Q2’16, global funding to VC-backed fintech companies dropped substantially. Despite this quarter’s decline, funding is on pace to exceed 2015 investment levels. Given global market uncertainties associated with the UK Brexit vote and its initial impact, the approaching US presidential election, ongoing concerns about valuations and significant headwinds in the marketplace lending space, it was not surprising to see VC investors taking a pause, particularly from making significant fintech mega-deals. It is expected that this cooling-off period may last through the remainder of the year as investors take a ‘wait and see’ approach expecting market conditions to stabilize over the next few months. While some VC investors are being cautious, many corporates are forging ahead with fintech-related activities. Banks, financial institutions and insurance companies seem to be continuing to shift their view of fintech companies as disruptors and competitors to one where they are viewed as partners and enablers. Over the quarter, many traditional companies, globally, focused on creating opportunities to leverage fintech, whether through direct investment, acquisition or the creation of innovation labs. While confidence in marketplace lending took a hit following revelations about wrongful activities with one of the market leaders* in addition to news about shutdowns, layoffs and weaker than expected volumes and margins, other areas of fintech continued to see substantial interest. InsurTech and blockchain distributed ledger technologies in particular accounted for a number of the large funding rounds during Q2’16. Regionally, the US continued to dominate VC deals in the fintech market — accounting for $1.3 billion of the total $2.5 billion raised during the quarter. In Europe, deals funding rose slightly overall, from $300 million in Q1 to $400 million in Q2, despite a slight drop in UK-based fintech funding. Asia experienced the most dramatic quarter-over-quarter decrease in funding to VC-backed companies — from $2.6 billion in Q1 down to just $800 million in Q2, despite a rise in the total number of fintech deals. This decline can be attributed to the lack of significant mega-rounds within the quarter. While VC-specific funding to fintech companies may be down in Asia, fintech’s popularity in the region should not be discounted. The world’s largest private technology funding round occurred during this quarter when Ant Financial raised $4.5 billion in China.