Global fintech investment sees sharp decline in 2016 despite record VC funding: KPMG

• Asia fintech investment experienced a new high of US$8.6 billion in 2016
• In Singapore investment in fintech companies fell from US$605 mil to US$214 mil in 2016

AFTER 2015’s record-setting US$46.7 billion in total global funding to fintech companies, 2016 experienced a decline in the market with a 47.2% slide in fintech investment, according to KPMG International’s The Pulse of Fintech – a quarterly report on global fintech investment.

The 2016 fintech funding total of US$24.7 billion was still significant compared to pre-2015 investment levels.

Merger and acquisitions (M&A) and private equity (PE) fintech deals dropped considerably in 2016, while venture capital (VC) investment reached a new high of US$13.6 billion compared to US$12.7 billion in 2015. Three Chinese mega-rounds buoyed global fintech funding significantly, led by the Q2 2016 Ant Financial record-setting US$4.5 billion funding round.

While VC investment softened somewhat in the second half of 2016 due to a decline in mega-rounds, the year ended on a positive note, with US$2 billion invested in Q4 2016 across 200 deals, compared to US$1.9 billion across 176 deals during the previous quarter.

“Two key trends in 2016 were collaboration, with fintechs learning to work with the big banks, and the rise of China. China has become a fintech powerhouse, both in investment flow and deal activity,” commented Warren Mead, Global co-leader of Fintech, KPMG International and Partner, KPMG in the UK.

In Singapore, the overall investment in fintech companies saw a drop from US$605 million to US$214 million in 2016. Conversely, the number of deals only decreased by two to 28 in 2016, indicating an overall fall in average deal value.

“In 2016, we saw MAS driving the evolution of Singapore into a prominent fintech hub. However, we’ve yet to see an impact on the levels of VC funding here. Looking to 2017, I believe MAS will fast-track the proposals to simplify authorisation process for VC funds to address this and attract more VCs to Singapore,” said Chia Tek Yew, head of Financial Services Advisory, KPMG in Singapore.

Next page: Looking back on 2016