According to Accenture, Global investment in financial technology (fintech) ventures in the first quarter of 2016 reached $5.3 billion, a 67 percent increase over the same period last year, and the percentage of investments going to fintech companies in Europe and Asia-Pacific nearly doubled to 62 percent.
Global Fintech Investment Grew 75 percent in 2015, Exceeding $22 Billion
The report shows that global fintech investment in 2015 grew 75 percent, or $9.6 billion, to $22.3 billion in 2015. This was driven by relatively moderate growth in the US fintech sector – the world’s largest – which received $4.5 billion in new funding (a 44 percent increase); rapid growth in China’s fintech sector which increased 445 percent to nearly $2 billion, as well as in India ($1.65 billion), Germany ($770 million) and Ireland ($631 million).
Fintech Investment in Asia-Pacific more than quadrupled in 2015 to $4.3 billion. It is now the second biggest region for fintech investment after North America, accounting for 19% of global financing activity and up from just 6% in 2010.
China has the lion’s share of investment,accounting for 45% in 2015, but India makes up 38% and is growing fast. Mumbai, Bangalore, Tokyo and Beijing are the major fintech hubs in the region by the number of deals.
Looking at deal volumes, 78% went to fintech companies targeting the banking industry, 9% to wealth management and asset management companies and 1% to the insurance sector. Payments is the most popular segment for fintech deals in Asia-Pacific, accounting for 38% of the total.
“The drive for fintech innovation is spreading well beyond traditional tech hubs,” said Accenture. “New frontiers like robotics, blockchain and the Internet of Things are bound less by geography than by the industry’s ability to adopt and scale clever ideas that improve service and efficiencies. The so-called ‘Fourth Industrial Revolution’ is a global phenomenon that brings new innovation and digital companies that compete and collaborate with traditional financial services. Bank customers stand to gain from this.”
‘Disruptive’ vs. Collaborative
According to the report, collaborative fintech ventures – those primarily targeting financial institutions as customers – are gaining ground over so-called “disruptive” players that enter the market to compete against those institutions.
“The proportion of competitive fintech ventures in Europe and Asia is much higher than in North America, which largely reflects the earlier stages of maturity of fintech markets, particularly outside of London,” said Accenture. “London’s welcoming regulatory environment has made a preferred market for competitive fintech ventures to test their propositions. Banks too stand to benefit from this, as it drives momentum to re-imagine their own capabilities.”
According to the report, so-called “disruptors” may compete against banks at first, but often end up aligning with them through investments, acquisitions and alliances, such as BBVA’s recent stake in Atom, a mobile-only bank developed in London that launched last week.
But while a growing proportion of collaborative fintech ventures have emerged, the report cites “relatively low participation” in venture-investing by the banks themselves, which in 2015 invested $5 billion of the $22.3 billion of reported investments. That compares to an estimated $50 billion to $70 billion that banks spend on internal fintech investment each year, according to the report.
“Banks that excel in assessment and adoption of external fintech disruptions, be they collaborative or competitive, can leapfrog the competition by providing the kinds of digital innovations that consumers have grown to expect from retail and technology giants.”
