Global
investment in FinTechs by venture capital grew to a record $27.4 billion in
2017, spurred on by high deal value in the US, UK and India. Digital payments and
lending services attracted the most investment capital.
FinTech
(financial technology) startups continue to draw the interest of venture
capital around the world. Venture capital firms and funds continue to see great
potential in the disruptive FinTech firms which are providing user-friendly
financial services and products through modern and innovative technology:
digital payments services and online lending platforms being the foremost among
them.
Confidence in FinTech has
accelerated venture capital financing in the industry to a record level of
$27.4 billion in 2017 – a growth of 18% from 2016. According to a recent
report from consulting firm Accenture,
the growth in FinTech investment has been driven by a surge in deal value in
the US, UK and India.
In the US, the value of
venture capital investment deals jumped 31% to $11.3 billion in 2017.
Meanwhile, in the UK, deal values almost quadrupled to $3.4 billion, while
India saw a near quintupling of investment to $2.4 billion in 2017. The volume
of global FinTech deals also rose greatly, from about 1,800 in 2016 to almost
2,700 in 2017.
Julian Skan, Senior
Managing Director in Accenture’s Financial Services practice, commented, “Much
of the growth, particularly in the U.S. and UK, has been driven by big new
investment flows from China, Russia, the Middle East and other emerging
economies.”
The
notable decline in investment share in the Asia-Pacific (APAC) region in 2017
is attributed to a sizable drop in FinTech financing in China, where investment
declined to $2.8 billion from a record high of $10 billion in 2016. After a
2016 which boasted the multi-billion dollar financing of FinTech Ant Financial
and Lufax, investors in China pulled back in terms of deal value, which
declined to $19 million on average in 2017 from $186 million the year prior.
The number of deals, however, nearly tripled to 146 in 2017 from 54 in 2016.
And while there was a higher volume of smaller deals, there were still some
fairly large FinTech deals in China, with real estate broker Homelink raising
$440 million and online finance firm Tuandei raising $290 million.
Meanwhile, the growth of
venture capital FinTech investment last year in the US, UK, and India included
some rather sizable deals. In the US, Kabbage Inc – an online lender for small
business – raised $900 million, while online lender Social Finance Inc raised
$500 million. In September 2016, US-based LendingPoint managed to raise
half-a-billion dollars from a credit transaction. The US continues to be an
important center for FinTech development, accounting for over half of the $97.7
billion global venture capital investment since 2010.
In the UK, BGL Group – a
digital insurance distributor – raised $900 million. The large deal helped push
the overall value of FinTech investments in the UK to a record $3.4 billion in
2017. Digital payments company TransferWise raised $280 million in another
sizable transaction.
In India, mobile-first
financial services company Paytm raised $1.4 billion in venture capital,
pushing FinTech investment levels to almost five times that of 2016. The number
of deals also increased, seeing a year-over-year rise of 65%. Accenture reports
that the increase in deal activity derived largely from a central bank
“demonetisation” policy aiming to fight corruption. The policy banned
high-value bank notes, shifting a large volume of transaction to digital payments
and cashless services, including Paytm.
Accenture notes that
FinTechs specialising in lending and payments services and products accounted
for the bulk of US investments in 2017, swallowing up 60% of $11.3 billion. As
can be seen in the above chart, the global makeup of deal value by FinTech
specialisation mirrors the US situation: payments and lending firms took the
bulk of the money last year, with 30% going to each; insurance-providing
FinTechs took 12%.
The analysis also shows
that the global volume of FinTech deals grew from about 1800 in 2016 to almost
2700 in 2017. From 2010 - 2017, the volume of deals grew at a compound annual
growth rate (CAGR) of 35%.
“This volume of investment
reflects the soaring demand within financial services for new digital
innovations, as these technologies prove their value and applicability in the
market,” said Richard Lumb, Group Chief Executive of Financial Services at
Accenture. “That will continue to position FinTechs for a vital role
in helping reshape the financial services landscape.”
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