BackGlobal fintech investment declines in 2016: Report
VC investment in India saw a significant decline in 2016, with just $216 million in investment, compared to $1.6 billion the previous year, says a KPMG report
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New Delhi: After 2015’s record-setting $46.7 billion in total global funding to fintech companies, 2016 experienced a decline in the market with a 47.2% slide in fintech investment, according to KPMG International’s quarterly report on global fintech investment that was released on Wednesday.
According to the report, total fintech funding in 2016 declined to $24.7 billion from $46.7 billion in 2015, while deal activity dropped from 1,255 to 1,076. VC funding to fintech companies reached a record $13.6 billion compared to 12.7billion in 2015, with 840 deals recorded. The overall fintech deal funding in Asia grew slightly year-on-year, reaching a new record high of $8.6 billion compared to $8.4 billion in 2015.
Both overall funding and VC funding to fintech companies declined in the US, while overall European fintech funding dropped sharply in 2016, even though transaction volume remained quite resilient, reaching $2.2 billion across 318 deals. Corporate VC investment in fintech rose for the seventh straight year, reaching 145 deals, to $8.5 billion in 2016.
India highlights
VC investment in India saw a significant decline in 2016, with just $216 million in investment, compared to $1.6 billion the previous year. This decrease highlights the impact that lack of mega-deals can have on a country, as actual deal volumes in India remained steady over the same period.
Despite the decline, India appears to be a key focus of VC investors in Asia. The government’s demonetisation efforts resulted in an increase in transactions for both payments companies and mobile wallet providers. This trend will be one to watch in the first half of 2017, as it may spark additional interest from investors.
Corporate interest in fintech is also expected to increase in India over the next year. Already, many of India’s banks and insurance companies have created innovation funds to invest in fintechs or set aside funds for collaboration.
As India continues to push its digital currency initiatives, there are plenty of opportunities for novel product development within the space, as a number of entrepreneurs look to utilize blockchain protocols or present better use cases for consumers looking to gain exposure to bitcoin.
Speaking about the report findings on India, Neha Punater, head of fintech, KPMG India, said, “With the demonetisation effort that started in Q4’16 (December quarter) in India, there has been a big increase in the number of transactions managed by both payments companies and wallet providers. As this effort continues, we should see momentum grow for digital platforms and fintech solutions."
Outlook strong for 2017
KPMG predicts that the strong growth witnessed in 2016 will continue, as the insurance industry plays catch-up with the innovations seen in the banking industry. Growing application of innovative technologies like wearables, the Internet of Things and artificial intelligence to the insurance industry are likely to spur further investment. It is also likely that participation of big tech companies in the fintech sector will increase. Already companies like China-based Alibaba Group are targeting fintech as a means to expand globally.
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