Global venture investment in FinTech grew by 11% to $17.4 billion in 2016 according to data provided by PitchBook. It is the first time China with $7.7 billion of investment outpaced the US with $6.2 billion. What is interesting is the number of deals in which the investments were made with China at 28 deals and the US at 650 deals.
Ant Financial, formerly Alipay and a subsidiary of Alibaba, led 2016 with a whopping $4.3 billion venture round, the largest in FinTech venture history followed by two other Chinese Firms Lufax.com and JD Finance. The Chinese appear to be playing a different game in FinTech – namely one involving great scale.
Ant’s $880 million acquisition of Texas based Moneygram last month and their announcement this month of a $3 billion debt fund for international investments and acquisitions is a good indicator that 2017 is likely to see the further consolidation in global FinTech.
In the U.S., Oscar - healthcare, was the largest funding round at $400 million. 500 Startups and Techstars top the list of most active investors by deal volume, a list dominated by U.S. investors. There we no notable FinTech IPOs in 2016, though three of the largest M&A deals were US based with the sale of TransFirst to TSYS, EFS to Wex, and OptionsHouse to E*Trade Financial.
FinTech investment in the UK was down by 34% to $783 million, mainly attributed to the uncertainty related to Brexit. The UK managed to maintain its third place ranking behind China and the U.S. with Starling Bank - a new challenger bank, closing the largest round at $101 million.
Investment in the UK was buoyant in the second half of 2016 following the Brexit referendum with nine of the top 20 deals closing led by Iwoca - alternative financing, at $57 million and Nutmeg - robo advice, at $52 million. Venture investors have indicated the impact of Brexit referendum was a ‘blip’ highlighting that those companies with good talent and fundamentals will always attract investment.
Artificial Intelligence was the hot FinTech topic at Davos this year. Personal Digital Assistants to AI Learning Networks are poised to help you with your financial planning and meeting your financial goals, whether it is making it to the end of the month, or making your next trade.
RegTech, technology to assist in better compliance and regulation, is also a hot topic. As compliance is often one of the largest expenses for banks, solutions in this area could have a great impact. Regulators are keen to deploy RegTech so that they can monitor industry compliance closer to real time.
So what guidance for global FinTech investors in 2017? Pay Attention! There are at least 15 different FinTech verticals across retail, capital markets and RegTech. One of the biggest trends in 2016 was the emergence of capital markets FinTechs, and InsureTech appears to continue to gather investment momentum.
Oh, and don’t forget about institutions when it comes to FinTech investment - the ‘great collaboration’ between FinTechs and Financial Institutions is set to continue into 2017. Institutions and Corporate Venture Capital funds may give venture investors a run for their money, in the spirit of ‘coopetition’ that is FinTech.
