Investment in venture capital (VC)-backed Chinese fintech companies hit a record high in 2016, bucking the global trend, finds KPMG’s latest report.
Investment activities in VC-backed fintech Chinese companies declined to 25 deals in 2016 from 40 deals a year ago, however, deal values increased 42.6 percent year to on year to hit a record high of USD6.7 billion, according to Pulse of Fintech, KPMG’s quarterly analysis of global investment trends in VC-backed fintech companies. The strong performance was largely boosted by three Chinese VC mega-deals in the first half of 2016.
Globally meanwhile, investment activity in VC-backed fintech companies fell 14.3 percent to 1,076 deals, while deal values declined 46.8 percent to USD25 billion, largely due to the absence of merger and acquisitions and private equity investment.
Arthur Wang, Partner and Head of China Banking, KPMG China, says: “Tech giants in China have become very active in fintech, leading to significant large deals which tend to boost the fintech sector. Looking forwards, mega-deals, or the lack of them, will likely continue to create major investment fluctuations, quarter to quarter.”
In terms of investments, payments and wealth management appear to dominate the Asian fintech space, at least at the top end of the market. Of the top 10 deals in the region, seven fell into the payments or wealth management verticals, according to the report. This is an interesting trend, as payments have begun to “cool” in Europe and the US, while picking up steam in Asia.
Looking ahead, data and analytics is set to be a key focus of fintech investment in Asia in 2017, the report highlights. The ability to access and analyse customer data is an important enabler to the success of many fintech product offerings. Interest in internet of things (IoT) technologies that provide adjacent value –such as home automation technologies that can be used by the insurance industry –is also expected to grow.
Real time payment options are also expected to drive significant fintech activity in Asia over the next few years as customers increasingly demand better options. On the payments and lending front, Asia may see some consolidation in the space during 2017 as strong platforms achieve profitability and gain brand recognition while weaker competitors fall by the wayside.
Wang concludes: “After experiencing significant success domestically, larger fintech players in China are beginning to look globally to fuel their continued growth and expect collaboration to be a critical part of their success. It is expected that further collaboration between fintech giants in China and companies in other regions will likely continue throughout 2017.”
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