China Fintech Investment Increased 67% to US$1 Billion in Q3

Investment into venture capital (VC) backed fintech companies in China increased 67 percent in the third quarter from the previous three months, bucking the global trend which has seen two consecutive quarter declines, finds a recent KPMG report.

Over US$1 billion was invested into VC-backed fintech companies in China with 12 deals done in the third quarter, compared to US$600 million and 13 deals recorded in the second quarter.

Global VC-backed fintech funding declined 17 percent to US$2.4 billion in the third quarter, while deal activities fell 12 percent to 178 deals, according to Pulse of Fintech, a quarterly global report on fintech VC trends published jointly by KPMG and CB Insights.

Investors continue to focus on payments and lending in China, although areas such as InsurTech are also starting to gain traction. The report highlights that China has embraced a shift toward using mobiles to make small transactions, with some retailers opting for online payment instead of cash. It is therefore not surprising to see an emphasis on payments and marketplace lending in the country.

“Blockchain is becoming very hot as banks and financial institutions examine best practices and look closely at what international companies are doing in the space,” says Blockchain has also gained attention with growing popularity in terms of payments and lending services. Raymond Cheong, Partner, KPMG China.

“VC investors are putting a lot of money into small blockchain technology companies in Asia; some very new companies are already into their second or third round of funding.”

While deal activities in Asia declined to a five-quarter low at 35 deals in the third quarter, funding into VC-backed companies increased 50 percent from a quarter earlier to US$1.2 billion, due to a strong performance in China.

Year-to-date results suggest Asia-based fintech investment for 2016 could top last year’s record high of US$4.8 billion, according to the report.

“There has been a lot of conversation about setting up consortiums in Asia,” says James McKeogh, Partner, KPMG China.

“We are seeing cross-industry and cross- jurisdiction organizations working together, utilizing technology and data from an infrastructure perspective in order to address some of the big gaps that exist. For example, property developers, banks and lawyers are working together to simplify the process of buying and financing property.” 

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