A recent report by global professional services company Accenture revealed that the value of global fintech investment in 2015 grew by 75 per cent to US$22.3 billion, driven by deal-flow across continental Europe and Asia Pacific (APAC).
In APAC, fintech investment more than quadrupled in 2015 to US$4.3 billion. The report stated that in the first three months of 2016, investments increased by 517 per cent compared to same period last year (US$445 million to US$2.7 billion).
In fact, fintech companies in APAC received more than 50 per cent of all investment in Q1, with China (US$1.97 billion, 45 per cent of investment share in 2015) and India (US$1.65 billion, 35 per cent of investment in the same year) taking the winning prizes in the sector.
Going by the number of deals, the major regional fintech hubs are Mumbai, Bangalore, Tokyo and Beijing.
The report was based on investment data from global venture finance-data and analytics firm CB Insights. The analysis included global financing activity from VC and private equity firms, corporation and corporate VC divisions, hedge funds, accelerators and government-backed funds.
Looking at deal volumes, 78 per cent went to fintech companies targetting banking industry, nine per cent to wealth management and asset management companies, while only one per cent went to the insurance sector.
While payment remains the most popular segment for fintech deals in APAC, and the percentage for insurtech remains small, the report predicts insurtech as the Next Big Thing with investment into insurtech firms more than tripling from 2014 to 2015.
Newer fintech segments such as risktech and regtech have also helped spur on investment into the sector.
The report divides fintech companies into two different types: Competitive and collaborative.
Competitive companies are defined as direct challengers to incumbent financial services institutions, while collaborative ones offer solutions to enhance existing market players’ position.
Competitive companies have enjoyed some success targeting less profitable segments by delivering better experiences directly to customers, however the report cited collaboration as key.
In 2015, the level of investment into collaborative fintech companies increased by 138 per cent (now represents 44 per cent of all fintech investment, up from 29 per cent last year). Whereas investment into competitive companies only increased by 23 per cent.
It indicates a ‘clear and growing appetite, from both sides, to collaborate’.
Despite stellar growth (compared to how investment grew only by 29 per cent in 2015), the report stated that there were signs that fintech industry had reached a new level of maturity and is moving into the mainstream.
Some regions cooling-off and a continued increase in larger deal sizes (such as in China, which recently saw peer-to-peer lender and broker Lufax raising US$1.216 billion in its latest fundraising round).
“A cool down in investment growth in some geographies, expansion in others, increasing deal sizes, successful IPOs and the elimination of weaker players are all helping to drive more realistic investor expectations of fintech,” said the report.
Also important to note that the ever-evolving startup scene is not the only source of opportunity for investors.
Even tech giants such as Google, Apple, Facebook, Amazon and Alibaba (GAFAA) are making attempts to redefine the customer experience and increasingly playing around the periphery of financial services, leaving traditional banks at a disadvantage as their view of the customer “cannot match the ‘high definition’ picture available to GAFAA.”
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