Total global funding to fintechs doubles over Q1’17 to US$8.4 billion, buoyed by strong M&A activity. US and Europe each see US$2 billion in funding to fintechs.
Total global fintech investment more than doubled quarter over quarter in Q2’17 to US $8.4 billion, up from US$3.6 billion in Q1’17, according to the KPMG Pulse of Fintech report.*
Global M&A investment helped drive the fintech market rebound, with US$5.9 billion in deal value for M&A for the quarter. Comparatively, global VC funding to fintech companies declined slightly, with just over US$2.5 billion in VC funding raised by fintechs in the quarter.
In the Americas, a single deal – the buyout of Toronto-based DH – accounted for US$3.6 billion in deal value, contributing to more than half the total fintech funding during Q2’17. This deal aside, the US and Europe saw the vast majority of fintech investment, with each accounting for US$2 billion. Asia lagged significantly behind the other regions with US$760 million invested. A lack of significant megadeals in Asia likely kept investment relatively weak this quarter.
“Fintech investment has made a comeback this quarter – a sign of renewed investor intent – particularly in the US and Europe,” said Ian Pollari, Global Co-Leader for Fintech, and a partner for KPMG Australia. “Corporates are increasingly accounting for significant amounts of fintech investment – a trend that isn’t likely to let up given the need for financial institutions to digitize the customer experience, become more cost efficient, and find new sources of earnings growth.”
The Americas region led in fintech funding for the quarter, lifted by the US$3.6 billion buyout of Toronto-based payments company DH by US-based Vista Equity Partners. The deal is the largest takeover of a Canadian company by a foreign firm since 2014.
Excluding the DH deal, the US continued to lead the pace in the Americas. The US saw US$2 billion in fintech investment during Q2'17, including five of the top 10 fintech deals globally - AvidXchange (US$300 million), Bright Health (US$160 million), Pos Portal (US$158 million), Fast Match (US$153 million) and Addepar (US$140 million). Strong PE and VC investment helped drive the fintech funding increase in the US, with VC investment rising to over US$1.5 billion across 105 deals.
Europe saw US$2 billion in fintech investment during Q2’17, a significant four-quarter high although well below the peak investment high of US$5.8 billion seen in Q4’15. Deal volume in the region declined from 110 to 90 quarter over quarter, still relatively strong historically.
Median VC deal size in Europe continued to be significantly higher than 2016’s US$10.2 million, with a median of US$15.9 million at the late stage as of the end of Q2’17. Median VC deal sizes also remain higher relative to 2016 at the early stage (US$5.4 million) and angel/seed stage (US$1.2 million).
The UK saw a major positive move one year following the Brexit referendum, with US$1.4 billion in total fintech funding in Q2’17, a six-quarter high, and over US$1 billion more than the Q1’17 tally.
Total fintech funding in Asia remained relatively steady quarter over quarter, with US$760 million invested across 51 deals during Q2’17, compared to US$790 million across 56 deals in Q1’17. Asia’s Q2 fintech financing trends were characterized by geographic diversity and a lack of mega-financings.
China notched nine transactions (VC and M&A) for a total of US$282 million in deal value, a slight uptick from the seven closed in Q1’17. Despite a decline in deal value, India recorded 19 deals and remains on pace to post an impressive year for fintech investment.
Corporate participation continues to soar in the region, with CVC investment growing from a strong 22.5 percent in Q1’17 to a record high of 36.6 percent in Q2’17, revealing a deep interest in fintech innovation from strategic players in Asia.
“Fintech continues to evolve with many established fintechs looking to expand their product offering and their geographic reach,” said Brian Hughes, Co-Leader, KPMG Enterprise Innovative Startups Network, and National Co-Lead Partner, KPMG Venture Capital Practice, KPMG in the US. “In addition we are also seeing new fintechs moving beyond customer facing services to target mid and back office inefficiencies.”
*Data for the Pulse of Fintech report provided by PitchBook.
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