Fintech funding hits all-time high in 2015, China accounts for almost one-fifth: KPMG analysis finds

Fintech funding hits all-time high in 2015 ...

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Global investment into venture capital (VC)-backed fintech startups hit a record high in 2015, of which China accounted for almost one-fifth of the total value, finds a recent KPMG report.

Fintech companies attracted total investment of USD19.1 billion in 2015, with USD13.8 billion invested into VC-backed fintech companies, a 106 percent jump compared to 2014, and a record year for VC-backed fintech investment. This is according to Pulse of Fintech, a quarterly global report on fintech VC trends published jointly by KPMG and CB Insights.

China’s fintech investment saw a significant increase last year – growing from USD619 million in investment in 2014 to almost USD2.7 billion in 2015 - despite lower transactions (26 deals compared to 37) the previous year. This significant rise is attributed to a number of mega deals valued over USD100 million each.

James Mckeogh, Partner, KPMG China, says: “The spike in investment activities in China is fuelled by the large market it represents - it has a huge appetite for innovative products, supported by the rapid pace of technology development.” 

Major cities including Beijing, Shanghai and Shenzhen recorded a number of deals, indicating that fintech hubs are likely to expand across China, the analysis finds.

In terms of sectors, China sees strong performance in lending technology such as peer-to-peer lending platforms; and underwriter and lending platforms that utilise machine learning technologies and algorithms to assess creditworthiness. A total of USD538 million was invested into 10 deals in China’s lending technology sector last year. The United States meanwhile topped the chart with USD2.72 billion in 36 deals. 

The analysis also finds that banks and insurance providers are active in this space in China. Irene Chu, Partner and Head of High Growth Technology and Innovation Group, KPMG China, says: “Chinese banks are focusing their strategies around the small and mid-sized enterprise space, an area that has been underserviced by large banks in the past. There’s also increasing interest in fintech companies that offer alternative financing arrangements, giving consumers alternatives beyond traditional banks. This is especially true in remote areas where large percentages of the population are under-banked.”

Overall, global funding momentum in the fintech sector experienced a pullback in the last quarter after reaching record highs in Q2 and Q3 2015. Without the support from mega deals, VC-backed fintech transactions declined slightly to 154 in Q4, from 165 in Q3, while deal values slumped 63.8 percent to USD1.7 billion. This is in line with the broader slowdown for VC-backed companies. 

KPMG notes that interest in fintech remains strong, however funding is expected to be tougher to come by and valuations will retreat in line with the underlying fundamentals; some consolidation among fintech companies in China is therefore expected.

Chu adds: “The Chinese government is conscious of the need to stabilize the market while enabling companies to innovate and expand. It is expected that over time, there will be more consolidation within fintech in China as non-performing startups fade away and larger ones grow and prosper as a result of corporate investment and partnerships.”

Mckeogh concludes: “Interest in the market continues to be on robo advisors, blockchain enable capability around asset management, consumer payments. Meanwhile, financial institutions are also looking at additional technologies and partnerships, in order to increase affinity with their consumers and customers.”

– Ends –

About CB Insights

CB Insights, backed by RSTP and the National Science Foundation, is a software-as-a-service company that uses data science, machine learning, and predictive analytics to help our customers predict what’s next—their next investment, the next market they should attack, the next move of their competitor, their next customer, or the next company they should acquire. The world’s leading global corporations including the likes of Cisco, Salesforce, Castrol, and Gartner as well as top tier VCs including NEA, Upfront Ventures, RRE, and FirstMark Capital rely on CB Insights to make decisions based on data, not decibels. 

About KPMG

KPMG is a global network of professional firms providing Audit, Tax and Advisory services. We operate in 155 countries and have more than 174,000 people working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.

In 1992, KPMG became the first international accounting network to be granted a joint venture licence in mainland China. KPMG China was also the first among the Big Four in mainland China to convert from a joint venture to a special general partnership, as of 1 August 2012. Additionally, the Hong Kong office can trace its origins to 1945. This early commitment to the China market, together with an unwavering focus on quality, has been the foundation for accumulated industry experience, and is reflected in the Chinese member firm’s appointment by some of China’s most prestigious companies. 

Today, KPMG China has around 10,000 professionals working in 17 offices: Beijing, Beijing Zhongguancun, Chengdu, Chongqing, Foshan, Fuzhou, Guangzhou, Hangzhou, Nanjing, Qingdao, Shanghai, Shenyang, Shenzhen, Tianjin, Xiamen, Hong Kong SAR and Macau SAR. With a single management structure across all these offices, KPMG China can deploy experienced professionals efficiently, wherever our client is located.

The Pulse of Fintech – Q1 2016

The Pulse of Fintech – Q1 2016

Quarterly analysis of global venture capital trends in the fintech sector.

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