Asia saw VC-backed fintech companies raise US$0.8 billion across 46 deals in Q2 2016 – a funding decline of 71 percent from Q1 2016 primarily due to the lack of major mega-rounds, according to The Pulse of Fintech, the quarterly global report on fintech VC trends published jointly by KPMG International and CB Insights.
Q12016 included two US$1 billion+ mega-rounds in China. Deal activity to VC-backed fintech companies in Asia reached a five-quarter high in Q2 2016 with 46 deals recorded.
On a global scale, investment to VC-backed fintech startups fell 49 percent. Despite this decline, VC investment in fintech is on pace to exceed 2015 results.
According to the new report, overall global investment in fintech companies across both venture-backed and non-venture-backed companies totaled US$9.4 billion in Q2 2016, buoyed by Ant Financial’s US$4.5 billion financing. Q2 2016 saw VC-backed fintech companies raise US$2.5 billion across 195 deals, a 12 percent drop in deal volume compared to Q1 2016.
“Despite VC backed funding to fintech decreasing in Q2, overall fintech funding remains on track to surpass 2015 levels,” says Ian Pollari, Global Co-Leader of Fintech, KPMG International.
“Traditional financial institutions and banks of all sizes are realizing that the opportunities associated with fintech aren’t about who has the deepest pockets – and so they’re intensifying their innovation efforts.”
Anand Sanwal, CEO of CB Insights, added: “The decline in fintech financing and deals is in line with what we’re seeing in the broader venture environment for startups, as VCs as well as crossover investors are pushing back harder on profitability and business model concerns.
“Despite the funding drop, previously under-invested areas of fintech such as an insurance area are gaining strong momentum among venture investors across geographies.”
The rise of InsurTech
Meanwhile, InsurTech is coming into its own as an area of fintech for venture capital investment, hitting US$1 billion across 47 deals in the first half of 2016.
Health insurance-related startups claimed the three largest deals of 2016 YTD, but startups across P&C and life insurance are also seeing an increasing amount of investment.
Banks continue to stay active in fintech investing
Over the last five quarters, Goldman Sachs, Citigroup and Banco Santander or their venture arms (excludes independent VC firms associated with these banks) have invested in 25 VC-backed fintech companies.
Other banks making investments globally across the fintech landscape include HSBC, JPMorgan Chase, and Mitsubishi UFJ Financial Group.
Brian Hughes, Co-Leader, KPMG Enterprise Innovative Startups Network and Partner, KPMG in the US said: "We are seeing more partnering by traditional financial services companies with fintechs to help develop new business models, while also enabling fintechs to expand their customer base and get the support they need to become sustainable.”
Hughes noted that although the overall VC investment in fintech is very positive, with InsurTech and Blockchain standing out as areas that continue to attract greater investment, the past quarter reflected a more cautious environment.