The last quarter of 2015 saw a reduction in investments into the fintech sector, with a sensible decrease from the incredible numbers of the previous quarters. Market analysts started to become skeptical that the industry could continue to grow at the same pace, with a slowdown for the start of the year that was foregone. However, the reality turned out to be a different story, with another record quarter of backing for new innovation in the financial services sector.
According to a new report from CBInsight and KPMG the deal activity on fintech startups rose 39% in Q1 2016 over the previous quarter, and it’s now on track to reach new records in this year. With $4.9B deployed across 218 deals, VC-backed companies took 86% of overall fintech funding.
It’s a fact that growth in funding during the last months has been supported by large investments, with thirteen $50M+ rounds in VC-backed fintech companies. The impressive growth in Asia, from $0.5B to $2.6B in just a quarter, was largely due to $1B+ mega-rounds to Lu.Com and JD Finance. Despite the current level of uncertainty, stock market volatility and the impending Brexit referendum, that could see the UK leaving the European Union, the number of fintech deals in Europe increased by a 25% over the previous quarter, with no mega-rounds and one large round between the top 25 with a German online lending platform called Spotcap that raised $34.4 million in February.
RegTech is technology that seeks to provide regulatory solutions, that can help decrease costs related to risk management and compliance monitoring. The UK is taking the early lead in the area, with the Financial Conduct Authority (FCA) opening a regulatory sandbox to allow businesses to test innovative services, products and business models aimed at enhancing customer outcomes while mitigating regulatory and reputational risks. Area growth and investments are expected to rise significantly over the coming year.
While a more mature market always comes with its own challenges, we remain convinced that the basic premise and inception of new models entering finance are still as relevant today as a few years ago. Looking at the data and activity from the broader market, it’s clear many share this world view and are positioning themselves in the market as it grows.
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