The KPMG Pulse of Fintech report is a must read for anybody interested in technology and financial services. And the current installation The Pulse of Fintech Q4 2017 is doubly noteworthy since it both recaps the state of fintech in 2017 and also looks ahead with some predictions for fintech in 2018. Read the report for full details, following is a summary:
Fintech Recap – 2017
1\ 2017 was 3rd highest annual total for VC (venture capital) invested over the last decade
- There were over 1000 venture transactions in fintech – the 4th consecutive year that has happened
- Total venture capital invested was $12.85 billion
- Overall venture market declined in 2017, and while this was reflected in fintech – the fintech sector remained comparatively robust
2\ Corporate Venture Capital (CVC) get in on the action
- Corporate participation in VC deals overall increased, and their involved in fintech stands out
- Corporates were involved in over 19% of all fintech venture financings, with a deal value over $5 billion
3\ There were fewer, although still significant, Mega-Deals
- Over $3,5 billion was invested over Series D or later financing rounds in 2017, the highest total for investments at these later stages
- China is a noteworthy investor in fintech companies, as enterprises look to scale and take control of certain sectors
4\ The Fintech sector is relatively Fresh
- KPMG suggest that as a result, some pre-money valuations will be skewed
- Fintech sector is giving rise to some fast-growing, large venture backed companies that can trigger mega-financing which in turn creates crazy valuations
5\ Fintech M&A increased in 2017
- Global fintech M&A resulted in 336 transactions, with a total value of $18 billion
- Consolidation was a key reason for fintech M&A, with incumbent financial services companies looking to fintech-companies for innovation and collaborative opportunities. Particularly in light of new regulation which increases the threat of non-financial services companies offering improved customer experience through mobile and digital based solutions
6\ Early Fintech’s evolve beyond initial beginnings
- Early fintech’s are maturing and moving out of their initial niche markets
- Fintech’s in sectors such as payments and lending stand-out – for example, in Europe some early fintech’s are now applying for banking licenses as they look to increase the number of products offerings
7\ The Nature of Fintech investors is changing
- Venture capital fintech deals have declined over the last few years, especially in the early stages but that is because the fintech sector is changing
- Fintech companies are changing, and so too are investors
8\ Corporate investors are getting Strategic
- In the early fintech days, corporate investors dabbled (to learn about the companies and the innovations) in the fintech space – investing small amounts across many fintech companies
- Now corporates understand the fintech opportunity and target fintechs that can help them protect and grow their existing business models, possibly into other sectors
9\ Fintech investors target Companies offering Payment and Lending Platforms, and Saas Solutions
- As financial services continue to manage financial, regulatory and compliance pressures, investors are focusing on fintech’s that can streamline and improve back-office processes
10\ Everybody is Watching Blockchain
- VC investment in blockchain reached a high of $512 million (a record!)
- Blockchain proof-of-concepts and use-cases are being developed and explored across many regions – with the Middle East and Singapore being 2 key hotspots
- Blockchain consortia has seen a few interesting developments:
- Compared to previous years, the creation of new consortia has decreased
- Some consortia have broken up, with the splinter groups creating new specialised groups
11\ InsurTech was the Darling of Fintech Investment
- VC Investment in InsurTech reaches a record high of $2.1 billion in 2017
- Insurtech companies sought to take command of various niche markets in the insurance industry
- Advances in automation, personalised insurance products and on-demand products resulted in high demand in the Insurtech sector
Fintech Predictions – 2018
1\ AI goes from Strength to Strength
- Innovation and the implementation of AI as an “underlying tech” accelerates
2\ RegTech Grows
- Investment in Regtech increases globally
3\ Collaboration is the name of the Game
- Collaboration and partnering between large providers increases
4\ The Next Generation of Digital Lending
- Think digital mortgages
5\ Blockchain takes a step Forward
- And evolves beyond the use cases of 2017, with some production system success
6\ Open Banking becomes a Reality
- With PSD2 open banking, APIs start to open doors for Third Party Providers
7\ Challenger Banks
- Incumbents build their own digital banks
8\ InsurTech Innovates
- Insurtech investments bolsters innovation and various hubs around the world
9\ Mature Fintech companies Evolve
- Provider additional products and services and thereby grow beyond their initial niche area
10\ Large Tech Companies and Fintech Companies Hook Up
- Fintech’s and large technology firms collaborate