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The Pulse of Fintech 2018 – Strong growth in FinTech investments worldwide, a closer look at Europe

The Pulse of Fintech 2018

Now summer has passed, it is a good moment to briefly reflect on the FinTech developments during the first half of 2018. In this recap we demonstrate the earlier announced Pulse of Fintech 2018 results. KPMG’s Pulse of FinTech, published this summer, shows that the year 2018 started with a bang for the FinTech market, with overall investment across venture capital (VC), private equity (PE) and mergers and acquisitions (M&A) deals at mid-year already well above 2017’s total investment results.

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KPMG Nederland

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​"The year 2018 started with a bang for the FinTech market, with overall investment deals at mid-year already well above 2017's total investment results."

Now summer has passed, it is a good moment to briefly reflect on the FinTech developments during the first half of 2018. In this recap we demonstrate the earlier announced Pulse of Fintech 2018 results. KPMG's Pulse of FinTech, published this summer, shows that the year 2018 started with a bang for the FinTech market, with overall investment across venture capital (VC), private equity (PE) and mergers and acquisitions (M&A) deals at mid-year already well above 2017's total investment results. The sharp increase in activity was driven in part by two massive deals: the record-setting $14 billion raise by Ant Financial during Q2'18 and Vantiv's acquisition of WorldPay in Q1'18 for $12.9 billion.

FinTech market activity worldwide gained momentum

Notwithstanding the two outlier deals, FinTech market activity worldwide gained momentum during the first half of the year as the geographic diversity and reach of FinTech investment continued to expand. Brazil, for example, gained some prominence earlier this year as Nubank joined the FinTech Unicorn Club. France, Switzerland, South Korea and Japan also saw significant FinTech deals — extending investment well beyond traditional FinTech leaders like the US, UK, China and India.

A broader range of companies focused on newer areas of FinTech innovation

In the more mature FinTech areas of payments and lending, dominant market players continued to emerge over the first six months of 2018, attracting larger and larger deal sizes. Meanwhile, a broader range of companies focused on newer areas of FinTech innovation, such as artificial intelligence (AI) and data analytics, subsequently attracting more attention from FinTech investors.

Also, regulatory issues have been a hot-button topic for corporate and other FinTech investors so far this year. Particularly in Europe, as a result of the implementation of Payment Services Directive 2 (PSD2) and General Data Protection Regulation (GDPR). The increasing focus on managing regulatory requirements and compliance contributed to an increase in funding for RegTech companies. In just six months, VC funding to RegTech companies has already exceeded RegTech funding raised during all of 2017.

Trends to watch for in Europe

In H1 2018, investments in FinTech companies in Europe hit $26 billion across 198 deals. Over the next six months, we predict investment in FinTech in Europe will remain robust, with investments increasing in areas like RegTech, InsurTech and Wealth Management. FinTechs focusing on the small business sector are also expected to be a key priority for investors. Similar to other regions of the world, Europe is also projected to see increasing interest in FinTechs providing digital identification verification. We will also likely see government interest in FinTech grow in many jurisdictions across Europe as they begin to recognize the applicability of technologies like blockchain to improve the efficiencies of government processes. In mature FinTech areas like payments and lending, there will likely be a significant amount of consolidation over the next six to twelve months as the largest platforms become bigger and others fail to achieve scale. Further trends to watch:

  • Banking corporates in Europe increasing focus on developing VC funds
  • Challenger banks continue to excel in Europe
  • Investment in RegTech on the rise in Europe
  • Blockchain becoming EU priority
  • UK is still attracting significant interest
  • German FinTech hubs expanding reach
  • Ireland's FinTech market strengthens

Trends to watch for globally

The global FinTech market is expected to remain strong over the remainder of 2018. Leading players in payments and lending will continue to emerge in the most mature markets, focusing their growth efforts on expanding the breadth of their product and service offerings. As leading companies become more pronounced, there will also likely be some consolidation of platforms unable to achieve scale.

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