KPMG has published its Pulse of Fintech, which covers the global fintech industry performance for Q1 of 2017. KMPG’s research finds global fintech investment to have a modest, yet solid start to the year, with a few strong performers to lead the way.
Global fintech investment falls slightly
The KMPG research shows the first three months of the year experienced 260 deals around the globe. These deals amounted to $3.2 billion in fintech investment. According to KMPG, this means the industry got off to a “quiet start”, with investment falling slightly from previous years.
Global fintech investment stood higher both during Q1 in 2016 and 2015. More specifically, VC investment stood during the first quarter stood only at $2.3 billion, which is another slight reduction to previous years.
Brian Hughes, the co-leader at KMPG Enterprise Innovative Startups Network and the national co-lead partner at KMPG Venture Capital Practice in the US, said, “Payments and lending continue to attract the most funding globally, although we’re seeing increasing interest in a variety of technologies.”
Regional results show improvements and slow-downs
Where is fintech investment currently concentrated on? The most deals are made in the US. The region witnessed 124 deals, which took home $1.5 billion in total investment. The figure includes venture capital and private equity investment, as well as M&A activity.
Europe had a strong first quarter. The region attracted $800 million investment for 89 deals. According to KMPG, the quarter was the strongest in recent years for the European VC fintech investment. Within Europe, Germany was the big winner witnessing a surge in investment. The UK held steady despite Brexit.
When it comes to slight disappointment, Asia wasn’t able to deliver strong results. It only witnessed deals worth $492 million, which is a significant drop from recent years. China and India remain at the front of Asian fintech investment, but Japan, Korea, Singapore and Australia were all picking pace.
The biggest deals of the quarter
One reason Asia wasn’t performing as well as it has in the past was due to the lack of multiple mega deals in the region. Where did mega deals go? The two biggest deals of the quarter were made in the Americas, with USA and Canada taking the top spot.
SoFI’s Series G round attracted $435 million in investment in the USA, while DirectCash Payments acquisition by CardTronics resulted in a deal worth $310.7 million. Interestingly, SoFi also acquired Zenbax during the first quarter, as it hopes to provide customers more functions of a traditional bank.
Stronger Q2 too incoming?
According to KMPG forecasts, the next quarter will pick up the pace and fintech investment should go up. The report also suggested that fintech players may start looking more towards traditional finance functions – KMPG predicts the largest fintech ventures will acquire bank licences and start operating more like traditional banks. First sign of this is the SoFi-Zenbax acquisition.
The report concluded the coming quarters are likely to see more expansion by established fintech firms, insurtech and regtech to become more attractive to investors and AI to be the key area of focus for investors and innovators.