Following the explosion in funding last year, fintech is experiencing a "plateau" in 2016 amid investor concern about high valuations, a lack of significant IPO exits and macro-economic factors, says a new report from KPMG and CB Insights.
In their latest 'Pulse of Fintech" the two firms say that VC-backed fintech companies raised $2.5 billion across 195 deals, less than half the amount secured in the same quarter last year. However, overall funding, including from angels, PE firms, mutual funds and hedge funds was up to $9.4 billion across 374 deals, although China's Ant Financial accounted for $4.5 billion of this.
In the second quarter North America accounted for over half of VC-backed fintech funding but deal activity fell to a five quarter low of 97. Meanwhile Europe saw 43 deal worth $369 million, with Germany outpacing the Brexit-rocked UK. Asia saw funding of $772 million, down on the previous quarter thanks to a lack of mega-deals.
The report notes that alternative lending is having a tough time, thanks in part to the scandal at Lending Club, but highlights insurtech and distributed ledger technology as strong areas of interest for investors.
One noticeable trend in Q2 highlighted by the report involves traditional corporates shifting their attention to co-creation opportunities. A number of larger firms have invested in internal innovation labs or innovation garages in order to bring together fintech companies. Corporates also participated in a five quarter high 32% of all VC-backed fintech deals.
Ian Pollari, global co-leader, fintech, KPMG, says: "We are seeing a continued diversification across many dimensions of fintech—the growth of different subsectors, the size of organizations participating, the geographic location of fintech companies attracting investment and increasing levels of activity from companies outside of the traditional financial services industry."
Read the full report here