The Pulse of Fintech Q1 2017

Global analysis of investment in fintech

 Welcome to the Q1’17 edition of KPMG International’s Pulse of Fintech report, in which we explore global trends and deal activity within fintech.

Globally, fintech investment held relatively steady as the market undertook a reset following a year of uncertainty across North America, Europe and Asia. Mergers and acquisitions (M&A) remained low following a major drop off in Q4’16, while venture capital (VC) funding to fintech took a small dip quarter over quarter. Meanwhile, private equity (PE) investment and deal activity rose slightly.

Corporate investors continued to drive fintech investment, with banks, insurance companies and other financial institutions recognizing the need to innovate and making investments accordingly. This quarter, corporates moved beyond traditional direct VC fintech investment and looked towards building partnerships and alliances with fintech companies in order to achieve their objectives.

On a regional basis, both the US and Europe started off the year with upticks in fintech investment and deal activity — with Europe in particular experiencing the highest level of investment in years. Asia, meanwhile, saw fintech investment drop, as the lack of mega-deals continued, and China introduced new fintech regulations that may take some time for fintech companies and investors to digest. The rapid expansion of Asia’s fintech ecosystem across jurisdictions and strong ongoing interest in fintech in the region, suggest this decline may be short-lived.

Within fintech, payments and lending continued to dominate deals in most jurisdictions, although artificial intelligence (AI), the Internet of Things (IoT), big data, regulatory technology (regtech) and insurance technology (insurtech) are quickly growing on the radar of investors.

We examine these results and other trends in this quarter’s report. We also explore a number of questions permeating the fintech market today, including:

  • While Q1’17 was quiet, is the tide about to turn for fintech investment?
  • How is the revised Payment Services Directive (PSD2) driving fintech activity in Europe?
  • What is driving the proliferation of fintech hubs globally?
  • Is regtech ready to come into the investor spotlight?
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