Capital flowing into venture capital (VC)-backed fintech companies has driven fintech investments in Asia to a new high in the first quarter of 2016, finds a recent KPMG report.
China attracted USD2.4 billion investment into VC-backed fintech companies from January to March through nine deals, compared to just USD300 million with six transactions registered in the fourth quarter last year. The significant increase was driven by the USD1 billion plus mega rounds to two online lenders, according to Pulse of Fintech, a quarterly global report on fintech VC trends published jointly by KPMG and CB Insights.
The USD2.4 billion funding to China fintech startups boosted total investment to VC-backed fintech companies in Asia to a new high of USD2.6 billion, up from just USD500 million in the previous quarter. This also means that China accounts for almost half (49 percent) of the USD4.9 billion global investment recorded in the first quarter, when 218 deals were concluded.
Raymond Cheong, Partner, KPMG China, says: “Global and domestic interest in China’s Fintech ecosystem continues. With innovation occurring across a number of sectors, consumers are increasingly looking to avail of technology and liquidity within the China VC community. This creates a perfect storm in terms of achieving these high levels of fintech investments. ”
In Asia, corporate interest in fintech continues to be strong – over 30 percent of the deals saw corporate participation – driven primarily by banking institutions that have already made fintech investments, whether through acquisition of fintech companies, partnerships or by setting up innovation programs.
James Mckeogh, Partner, KPMG China, says: “The Asian market has multiple opportunities for leveraging innovative fintech companies to help improve efficiencies with current business models and also address market needs which are not currently being fulfilled by the incumbents. This is driving the large investment we see across the region.”
“Asian banks are increasing their investment and experimentation with fintech - this is going beyond the traditional accelerators into more long term results-driven mechanisms,” he adds.
In addition, the analysis finds that investors are increasingly looking for companies with regional or global expansion potential. The report notes that many fintech companies have been established within the regulatory framework of their home country and so may not be easily scalable to others. Investors recognize this and are seeking out fintech companies with scalable cross-border offerings or those that can easily replicate their models in different countries.
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‘The Pulse of Fintech’ is a quarterly report created by KPMG Enterprise and KPMG Fintech along with CB Insights (the ‘go to’ name for insights related to venture capital investment). Given the significant interest in fintech globally, and its ongoing evolution in terms of market drivers, technologies and potential use-cases, KPMG and CB Insights are partnering to bring you the pulse of fintech on VC investment globally. Each quarter, we’ll highlight key fintech deals, issues and challenges around the world, in addition to key trends and insights related to fintech in key regions, including the North America, Asia and Europe.