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Fintech investment doubles globally to $8.4 billion

Investment in financial technology firms (fintech) has doubled in the past quarter to $8.4 billion globally, with 293 deals, according to KPMG's latest Pulse of Fintech quarterly report. The report's key findings shed some light on how the fintech sector is developing:

  • VC investment deal volume in 2017 is on track to equal the number of VC investment deals (more than 1,000) done last year;
  • corporates are key drivers of VC investment, with corporate participation in all VC deals globally reaching a new high of 21 per cent during the first half of 2017, up from 17 per cent in 2016;
  • there is a trend for large fintech deals, showing that fintech companies are growing and expanding, for example in Q2 2017, Vista Equity Partners bought DH Corp for $3.6 billion;
  • fintech investment in Europe more than doubled in Q2 2017, with over $2 billion invested, compared to just $880 million in Q1;
  • investment and deals volume for regulatory technology firms (regtech) continued to gain strength in Q2 with a mid-year total of $591 million invested across 60 deals;
  • China received much less fintech investment in Q2 than its regional counterparts, which contributed to the region’s just $760 million in funding;

Blockchain, AI, Cloud

Other important fintech trends highlighted in the KPMG report include the focus of investors on blockchain, artificial intelligence (AI), Cloud computing and robotics. The report notes that blockchain continues to attract significant attention from both traditional VC investors and corporations, as well as from consortia, such as R3 and B3i. It notes: “The diversity of blockchain prototypes and pilot projects appear to have grown exponentially, including those focused on credit default swaps, supply chains and re-insurance.”

Bank-fintech collaboration and PSD2

Banks are also looking to compete with challenger banks that have much smaller cost-to-income ratios by increasing focus on mid- and back-office efficiencies. Also, as the EU's revised Payments Service Directive (PSD2) becomes effective at the start of 2018, there will be increasing demand for fintechs that can help banks develop application programme interfaces (APIs) for an open banking environment.

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Best Practices & Benchmarking in Operations

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