Globally, the FinTech market made a strong rebound in Q2’17, with total investment more than doubling on a quarter-over-quarter basis to more than $8.4 billion. Large increases in private equity (PE) funding and M&A funding propelled the increase, while the amount of venture capital (VC) investment held relatively steady.
Business-to-business (B2B) related FinTech investments gained prominence during the quarter, prompted by growing recognition that many traditional financial institutions and insurance companies need to reduce their cost base.
This has led to an increase in corporate interest in technologies that can enable more efficient back office functions, such as artificial intelligence (AI), robotics, RegTech, data & analytics and cloud services. Blockchain also remained a strong area for investment, expanding its reach well beyond banking and into potential applications for insurance, health and government.
“In order to compete and win in the future, financial institutions will need to become far more aggressive around reducing their cost base. This will likely drive significant corporate interest in FinTechs, helping them achieve cost efficiencies through the deployment of smarter technologies within their operational and product areas,” explains Ian Pollari, Global Co-Leader of FinTech, KPMG International and Partner and National Sector Leader, Banking, KPMG Australia.
The Americas dominated FinTech investment during Q2, primarily the result of the $3.6 billion buyout of Canada-based DH Corp. Excluding this outlier deal, it was clear that the US and Europe drove the vast majority of FinTech investment, with both regions seeing $2 billion in investment. Asia, meanwhile, saw relatively even investment quarter over quarter, held back only by a lack of mega-deals.
This could change rapidly over the next few quarters as more activity is expected, particularly from large tech giants and payments companies focused on international expansion. Southeast Asia is set to become a key battleground as competition heats up in the payments space.