The KPMG Pulse of Fintech Q4 2016 – Global analysis of investment in Fintech – is a must read report. The report neatly reveals global and regional fintech trends, highlights Fintech investment over the last 7 years, and based on their analysis forecasts the likely trends for 2017. In this post, i indicate the 10 key points i noted as i read through the fintech report – please refer to the KPMG Pulse of Fintech Q4 2016 Report for full details and information.
1/ Total Global Fintech Investment in 2016 Dropped
- KPMG indicate total global fintech investment in 2015 hit an all time record at $46.7 billion, but dropped down to $24.7 billion in 2016
- Seen on its own, thats pretty dramatic and makes a good headline – but 2015 was a “bumper” year, global fintech investment in 2014 was $29 billion
2/ Fintech Investment Varies Quite a Bit by Region & Year on Year
Fintech investment in:
- The America’s:
- 2014 – $14.1
- 2015 – $27.4 billion
- 2016 – $13.5 billion
- Europe:
- 2014 – $12.0 billion
- 2015 – $10.9 bilion
- 2016 – $2.2 billion
- Asia:
- 2014 – $3.3 billion
- 2015 – $8.4 billion
- 2016 – $8.6 billion
3/ Global Uncertainty Impacted Fintech Investment in 2016
Factors that brought about this uncertainty include the impact of the Brexit vote in the UK and across Europe, presidential elections in the US and the anticipated slowdown in China
4/ Payments & Lending Models are performing differently across regions
For example, in:
- The US there has been significant growth in the number of payment and lending companies, leading some to think that the sector is “saturated.” As a result, investors in the US are wanting to improve and scale their existing payments and lending fintech companies
- Countries where there is a large unbanked population, payments and lending platforms continue to draw significant attention
- India and Brazil are called out in the report as countries where payments and lending that continue to bolster fintech growth
5/ Goverments, Regulators and Fintech’s Collaborate to Innovate
KPMG highlight how many governments and regulators are realising the fintech opportunity in areas of:
- Financial inclusion
- Improvements in the banking system, which in turn improves the overall economy
- Innovation and have as a result facilitated the growth of fintech hubs and fintech bridges, and created regulatory sandbox environments — all of which help to reduce the roadblocks that may hinder fintech companies
6/ Insurtech is Hot on the Investor Radar
KPMG describe how insurance is ripe for disruption because it is bogged down by legacy IT systems, has been impeded by regulators and has limited innovation. All of which have meant that insurance has lagged behind other financial service sectors – until now!
Now there are several accelerator programs encouraging innovation in specific sectors within insurance, cross industry technologies (healthtech, automotive telematics or monitoring, industry 4.0 & commercial drones) and corporate investment will only encourage the growth of insurtech in 2017
7/ Blockchain – The Proof is in the Pudding!
2016 saw significant investor interest in blockchain technologies, and that is now slowing up say KPMG. Also, there is now a shift from investing in blockchain providers to investing in blockchain based projects.
In short investors want proof that the technology can live up to its hype. There is now pressure to move on from theoretical test cases to commercial and profitable solutions.
8/ Europe – Fintech hubs, niche banking and the Nordics
KPMG draw attention to the:
- Growth and evolution of Fintech hubs in Europe, but question how competitive they can be against the larger hubs in the US, China and Singapore
- Rise of challenger banks (such as Atom Bank, Monzo and Starling) in the UK
- Success of Nordic-based fintechs such as iZettle (Sweden), MobilePay (Norway) and growth of fintech hubs, accelerators and incubators in the region
9/ Asia – Regulation, Collaboration & Real Time
In Asia KPMG reveal a couple of interesting developments:
- Regulatory partnerships are key to the success of fintech ecosystems in Asia – eg. MAS and ASIC, Korea and Britain each signing fintech agreements
- Fintech companies in China are now going global to grow and are likely to partner with other financial services providers – e.g. AliPay and Commonwealth Bank
- Customer demand in the region is driving the need for real time payments
10/ 2017 – PSD2, APIs, Big Data AI & Tech Giants
KPMG highlight a couple of things to look out for 2017:
- With the European Union Payments Services Directive (PSD2) there will be a focus on fintech companies that offer open banking, API platforms big data and analytics
- As financial services look to reduce cost and increase efficiency Artificial Intelligence is widely seen as an enabling technology
- Global technology companies will increase their interest in fintech – check out Ant Financial!