RISK: FinTech investment exploded in 2015 despite Q4 turndown: study

"...Banks have moved from seeing fintech companies as disruptors to co-creators."

Last year, global investment in FinTech companies reached $19.1 billion, including $13.8 billion into venture capital-backed businesses, a KPMG and CB Insights report found. That more than doubles the funding total seen in 2014.

Nevertheless, Q4 saw a 64 percent drop off in funding, with just $1.7 billion invested.

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“Funding momentum in the FinTech sector reached record highs in Q2 and Q3,” says Anand Sanwal, CEO of CB Insights. ”The Q4 pullback was consistent with the broader slowdown for VC-backed companies. The interest in fintech remains strong but the pullback does suggest that funding will be tougher to come by and valuations will probably reset a bit as they’d become detached from their underlying fundamentals.”

Funding for North American FinTech companies dropped off in the second half of the year–178 deals compared to 200 deals in the first half.

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In Asia, startups had a record year of investments, raising more in 2015 ($4.5 billion) than in the previous four years behind. Chinese companies received more than half the funding ($2.6 billion), while total funding in Indian businesses leapt past $1 billion for the first time.

“In 2015, Asia, and especially China, benefitted from the presence of local corporations both in tech and financial services such as Alibaba, Tencent, and Ping An, all of which become increasingly active investing in and building services in FinTech,” says Sanwal. “Combined with the participation of hedge funds and banks, Asian FinTech companies enjoyed a somewhat unprecedented funding environment.”

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The study also found corporate investment increase, especially in Asia.

“Over the past couple of years there has been a significant shift as banks have moved from seeing FinTech companies as disruptors to co-creators,” says Brian Hughes, co-leader in KPMG enterprise innovative startups network, and national co-lead partner in KPMG venture capital practice. “Today, many of the banks are increasingly collaborating with FinTech companies to access new markets and strengthen the user experience of their customers around the world.”

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