Fintech sustains high level of investment during 2017
Global investment in financial technology (fintech) continued to boom in 2017. Investment in the UK accounted for half of the total European investment.
15 February 2018
Investment into global fintech continued to grow in 2017 reaching the US$31B mark, Q4'17 alone saw US$8.7B of investment, sustaining the high level of investment seen in 2016, according to the KPMG Pulse of Fintech report.
Among fintech sub-sectors, both insurtech and blockchain saw record levels of VC investment and deal volume in 2017, with insurtech accounting for US$2.1B across 247 deals and blockchain generating $512M of investment across 92 deals.
Fintech investment in Europe reached over US$2B in Q4'17, with VC investment achieving a new record of US$960M – while total investment for 2017 reached US$7.44B. In Asia, fintech investment moderated to US$748M for Q4'17, to reach only US$3.85B for all of 2017, after more than US$10B in funding in 2016.
“The global fintech market has advanced considerably over the past few years,” says Ian Pollari, global co-lead, KPMG Fintech. “As the sector matures, investors have shifted from experimenting with fintech to seeking out value-driven opportunities. This is particularly true for corporates who continue to invest and see fintech as a strategic play that will help accelerate their digital transformation agendas.”
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Anton Ruddenklau, partner & head of digital & innovation, financial services, KPMG in the UK said, “The UK’s fintech market remains remarkably resilient. The final quarter of 2017 saw the most deal activity since 2014, largely driven by payment companies.“As we enter a world of open banking, I expect that to continue. Large financial institutions still have deep investment pockets, the big banks want to get involved in fintech and acquire start-ups to help meet their growth ambitions. We’re likely to see more purchasing than investment through 2018.”
London continues to act as the magnet for the UK with several large deals, including TransferWise’s $280m VC funding round and Trayport’s $727m acquisition, providing a significant boost to the UK’s total fintech investment.
Rachel Bentley, fintech specialist with KPMG’s innovative start-ups practice in London said, “London was one of the earliest fintech innovation centres so it now has a large number of mature businesses with good traction in the market, clear paths to profitability, and strong value propositions for investors.“This maturity has helped the UK market to remain resilient in an uncertain economy and later stage investment definitely helped to boost the numbers in the final quarter. At the same time, a positive regulatory climate and strong fintech ecosystem continues to attract new start-ups and we are also seeing earlier stage activity across the sector, reflecting the diversity of the UK market and a positive sign for future fintech investment.”
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Global investment in the fintech sector
This brings the total global investment in the fintech sector over the past three years to US$122B. While global fintech deal volume declined in Q4, the number of venture capital (VC) transactions exceeded 1,000 for the fourth consecutive year in 2017, with private equity (PE) deals reaching a new high of 139. Fintech M&A also ticked up for the year with 336 transactions in 2017.Among fintech sub-sectors, both insurtech and blockchain saw record levels of VC investment and deal volume in 2017, with insurtech accounting for US$2.1B across 247 deals and blockchain generating $512M of investment across 92 deals.
Almost half of global funding raised in the US
Geographically, the US accounted for almost two-thirds of global fintech investment in Q4'17, with $5.8B in funding raised, and almost half of the full-year 2017 global total, with US$15.2B raised for the year.Fintech investment in Europe reached over US$2B in Q4'17, with VC investment achieving a new record of US$960M – while total investment for 2017 reached US$7.44B. In Asia, fintech investment moderated to US$748M for Q4'17, to reach only US$3.85B for all of 2017, after more than US$10B in funding in 2016.
“The global fintech market has advanced considerably over the past few years,” says Ian Pollari, global co-lead, KPMG Fintech. “As the sector matures, investors have shifted from experimenting with fintech to seeking out value-driven opportunities. This is particularly true for corporates who continue to invest and see fintech as a strategic play that will help accelerate their digital transformation agendas.”
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Fintech investment continues to thrive in the UK
The UK accounted for over half of the total European fintech investment ($7.4bn) and 14 per cent of the global total ($31bn).Anton Ruddenklau, partner & head of digital & innovation, financial services, KPMG in the UK said, “The UK’s fintech market remains remarkably resilient. The final quarter of 2017 saw the most deal activity since 2014, largely driven by payment companies.“As we enter a world of open banking, I expect that to continue. Large financial institutions still have deep investment pockets, the big banks want to get involved in fintech and acquire start-ups to help meet their growth ambitions. We’re likely to see more purchasing than investment through 2018.”
London continues to act as the magnet for the UK with several large deals, including TransferWise’s $280m VC funding round and Trayport’s $727m acquisition, providing a significant boost to the UK’s total fintech investment.
Rachel Bentley, fintech specialist with KPMG’s innovative start-ups practice in London said, “London was one of the earliest fintech innovation centres so it now has a large number of mature businesses with good traction in the market, clear paths to profitability, and strong value propositions for investors.“This maturity has helped the UK market to remain resilient in an uncertain economy and later stage investment definitely helped to boost the numbers in the final quarter. At the same time, a positive regulatory climate and strong fintech ecosystem continues to attract new start-ups and we are also seeing earlier stage activity across the sector, reflecting the diversity of the UK market and a positive sign for future fintech investment.”
For related news and features, visit our Technology section. Look out for the launch of 2018’s Relocate Awards, entry is now open. Relocate’s new Global Mobility Toolkit provides free information, practical advice and support for HR, global mobility managers and global teams operating overseas.
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