August 4, 2017

Global FinTech investment rebounds in Q2'17: KPMG

Total global funding to fintechs doubles over Q1'17 to US$8.4 billion, buoyed by strong M&A activity

TORONTO -- Total global FinTech investment more than doubled quarter over quarter in Q2'17 to US$8.4 billion, up from US$3.6 billion in Q1'17, according to the KPMG Pulse of Fintech report.

Global M&A investment helped drive the FinTech market rebound, with US$5.9 billion in deal value for M&A for the quarter. Comparatively, global VC funding to fintech companies declined slightly, with just over US$2.5 billion in VC funding raised by fintechs in the quarter.

In the Americas, a single deal – the buyout of Toronto-based DH – accounted for US$3.6 billion in deal value, contributing to more than half the total FinTech funding during Q2'17. This deal aside, the U.S. and Europe saw the vast majority of FinTech investment, with each accounting for US$2 billion. Asia lagged significantly behind the other regions with US$760 million invested. A lack of significant megadeals in Asia likely kept investment relatively weak this quarter.

"Fintech investment has made a comeback this quarter – a sign of renewed investor intent – particularly in the U.S. and Europe," said Ian Pollari, global co-leader for Fintech, and a partner for KPMG Australia. "Corporates are increasingly accounting for significant amounts of fintech investment – a trend that isn't likely to let up given the need for financial institutions to digitize the customer experience, become more cost efficient, and find new sources of earnings growth."

Key Q2'17 highlights

  • Total FinTech investment increased from US$3.6 billion in Q1'17 to US$8.4 billion in Q2'17.

  • VC funding remained solid globally with US$2.5 billion invested across 227 deals.

  • At mid-year, the global median VC fintech deal size of US$12 million for late-stage deals was substantially lower compared to the 2016 total of US$18 million. The median deal size was up for angel/seed stage deals (US$1.3 million) and for early-stage rounds (US$6.2 million).

  • Corporate VC investment in fintech is on pace to near 2015's total, with US$2.6 billion invested in deals with corporate participation by the end of Q2'17, compared to US$9 billion in all of 2016, which was skewed by mega-deals. Corporate participation in fintech deals by volume is also up – with 21 percent participation in 2017 deals so far compared to 17 percent in 2016.

  • Investment in regtech was up significantly in Q2'17, with the US$591 million invested in the first half of 2017 already exceeding the US$583 million raised during all of 2015, and on pace to significantly exceed 2016's total by year end.

  • Business-to-business (B2B) fintech companies are getting a significant amount of attention, with three companies in the top10 global fintech deals this quarter: CCH Tagetik (US$321 million), Pos Portal (US$158 million) and ITRS Group (US$140 million).

  • Americas region posts strong fintech results for Q2'17, buoyed by single Canadian buyout and broad US investment

The Americas region led in FinTech funding for the quarter, lifted by the US$3.6 billion buyout of Toronto-based payments company DH by U.S.-based Vista Equity Partners. The deal is the largest takeover of a Canadian company by a foreign firm since 2014.

Excluding the DH deal, the US continued to lead the pace in the Americas. The US saw US$2 billion in fintech investment during Q2'17, including five of the top 10 fintech deals globally - AvidXchange (US$300 million), Bright Health (US$160 million), Pos Portal (US$158 million), Fast Match (US$153 million) and Addepar (US$140 million). Strong PE and VC investment helped drive the fintech funding increase in the US, with VC investment rising to over US$1.5 billion across 105 deals.

"Fintech continues to evolve with many established fintechs looking to expand their product offering and their geographic reach," said Brian Hughes, co-leader, KPMG Enterprise Innovative Startups Network, and National Co-Lead Partner, KPMG Venture Capital Practice, KPMG in the US. "In addition we are also seeing new fintechs moving beyond customer facing services to target mid and back office inefficiencies."


 

 

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