Fintech funding feels the pinch 23 November 2016London Reporter: Mark Dugdale
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Venture capital-backed financial technology funding fell almost a fifth in Q3 2016, a new report has found.
Quarterly report The Pulse of Fintech from KPMG International and CB Insights noted investors continued to take a more cautious approach to fintech investments, with funding down 17 percent in Q3 2016 to $2.4 billion. Deal activity fell 12 percent to 178 deals.
Overall global investment in fintech companies across both venture-backed and non-venture-backed companies totalled $2.9 billion in Q3 2016.
Anand Sanwal, CEO of CB Insights, commented: “While we continue to see significant investment into fintech companies globally, the euphoria for mega-deals that we saw into the latter half of 2015 has waned. Total investments to key areas like marketplace lending and blockchain technology have both seen declines heading into the tail-end of 2016.”
Q3 2016 saw European fintech deals fall 17 percent quarter-over-quarter as funding in Europe dropped 43 percent over the same time period to $233 million.
Germany outpaced the UK in terms of fintech funding for the second consecutive quarter, with 35 percent more funding raised by Germany-based venture-backed fintech companies than those in a UK hit by the Brexit vote in June.
North America saw both fintech funding and the number of deals fall on a quarter-over-quarter basis, as venture-backed startups raised just $900 million across 96 deals, a drop of 5 percent in deals from Q2 2016.
Funding in Q3 2016 to venture-backed fintech companies in North America fell 68 percent compared to the same quarter last year.
The news was better in Asia, where, despite the number of venture-backed fintech deals dropping to a five-quarter low, funding increased 50 percent on a quarter-over-quarter basis to reach $1.2 billion.
Corporates continue to be highly active in Asia’s fintech investment environment, participating in more than half of all deals to venture-backed fintech startups in Q3 2016.
Asia’s outpacing of the US in fintech funding is “a major shift from historical norms”, according to Warren Mead, global co-leader of fintech at KPMG International.
He said: “The question is whether Asia will continue to set the pace headed into 2017. With the diversity of investments and widespread support for the growth of fintech hubs in the region, it’s a very distinct possibility.”
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