The KPMG results of a “Pulse of Fintech” report for quarter 4, 2016 have been released today. In the report, the auditing firm provides a financial recap of 2016 and additionally, highlights key trends and opportunities for 2017.
The KPMG report examines the worldwide performance of the fintech sector, stating “overall, 2016 was a challenging year for fintech investment,” and citing the Brexit, US Presidential, the slowdown in China, and global fluctuations in the exchange rate as reasons for a likely decline in total investment.
Quite notably, total funding for US fintech companies dropped from $27 billion in 2015 to $12.8 billion, yet the total investment in Australian fintech companies increased from $185 million (with 23 deals) in 2015 to $656 million (with 25 deals). Some highlights from the report are:
- Investments, Mergers and Acquisitions (M&A): There was a decrease in the number of M&A and private equity (PE) funding— from $46.7 billion in 2015 to $24.7 billion in 2016. On the other hand, here has been a positive increase in global venture capital investment, suggesting that fintech has been an attractive sector in 2016 and will continue to do so in 2017. Commenting on Australia’s performance in fintech investment, KPMG’s fintech global co-lead Ian Pollari said,
Australia’s performance was driven by some large deals, and specifically M&A [mergers and acquisitions] and private equity transactions. While mega deals result in peaks and troughs in overall figures, the trend is clear and demonstrates increasing interest and investment activity in fintech.
- Enthusiasm for burgeoning fintech areas: Investors witnessed saturation within mature markets of payment and lending, however, overall, there is an interest in global and regional trends, and disruptive technologies like artificial intelligence (AI) and insurance tech.
- Decline in median stage financing: After three years of upward trends, the median late financing stage declined from $21 million in 2015 to $17 million in 2016.
- Governments recognize the value of fintech innovation and the important role that fintechs play in the economy. According to the report: “this alignment of fintech with government objectives may be one reason why a number of governments and financial regulators have moved quickly to support the development of fintech hubs and to help fintech companies manage the regulatory challenges associated with new technologies. For example, in 2016, the UK, Australia, Singapore, Malaysia, and Thailand all announced the development of regulatory sandbox programs.”
The KPMG report highlights the burgeoning fintech market in Australia, as the founder of Australian venture capital fund Sapien Ventures, Victor Jiang rightly says:
There are more fintech investors coming onto the scene all the time. With US policy uncertainties and Brexit, the time is ripe for Australia to become a leading regional hub of fintech investment and excellence.