Venture investors are pulling back from fintech for the second straight quarter as global venture capital-backed (VC) investments in fintech declined by 17% in the third quarter to $2.4 billion (all figures in U.S. dollars) while the number of deals dropped by 12%, according to the latest quarterly report from KPMG International and CB Insights.
“While we continue to see significant investment into fintech companies, globally, the euphoria for mega-deals that we saw into the latter half of 2015 has waned,” says Anand Sanwal, CEO of CB Insights, in a statement. “Total investments to key areas like marketplace lending and blockchain technology have both seen declines heading into the tail end of 2016.”
By region, Asia led the fintech funding activity as it generated $1.2 billion in quarterly investment across just 35 deals in Q3, the report notes. In contrast, fintech funding in North America fell to $0.9 billion across 96 deals in Q3, down by 68% compared with Q3 2015. In Europe, fintech funding dropped by 43% year-over-year to $233 million.
“This quarter, Asia outpaced North America in terms of fintech funding — a major shift from historical norms,” says Warren Mead, global co-leader of fintech at KPMG, in a statement. “The question is whether Asia will continue to set the pace headed into 2017. With the diversity of investments and widespread support for the growth of fintech hubs in the region, it’s a very distinct possibility.”
Amid these headline declines in funding levels, the report also notes that corporate backers continue to drive much of the deal activity, participating in 30% of the global VC fintech deals.
“Fintech funding is down this quarter, but it in no way reflects a lack of interest among investors, particularly corporates that see fintech as a way to leapfrog ahead of the competition,” says Brian Hughes, co-leader, KPMG Enterprise Innovative Startups Network and partner, KPMG in the U.S., in a statement. “This interest will continue to grow as corporates are looking to take advantage of the opportunities fintech provides.”
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