Global investment in fintech ventures in the first quarter of 2016 reached US$5.3 billion, a 67% increase over the same period last year, according to a new Accenture report.
Accenture’s Fintech and the Evolving Landscape: landing points for the industry structure report showed that global fintech investment grew by 75% from US$ 9.6 billion in 2014 to US$22.3 billion in 2015.
This rise was driven by US$4.5 billion of new funding (a 44% increase) in the US fintech sector – the world’s largest – and rapid growth in the Asia-Pacific (APAC) region, where investments more than quadrupled to US$4.3 billion. China’s fintech market increased 445% to nearly US$2 billion, while India received US$1.65 billion of funding.
In the first three months of 2016, APAC investments increased by 517% compared to the same period last year – US$445 million to US$2.7 billion – driven almost entirely by Chinese fintech investments.
Meanwhile in Europe overall fintech investment more than doubled (120%) between 2014 and 2015 and the number of deals increased by 51%. Investment in German fintech ventures grew 843% in that period to US$770 million.
“The drive for fintech innovation is spreading well beyond traditional tech hubs,” said Richard Lumb, Accenture’s group chief executive of financial services. “New frontiers like robotics, blockchain and the internet of things are bound less by geography than by the industry’s ability to adopt and scale clever ideas that improve service and efficiencies. The so-called ‘Fourth Industrial Revolution’ is a global phenomenon that brings new innovation and digital companies that compete and collaborate with traditional financial services. Bank customers stand to gain from this.”
Collaborative fintech ventures – those primarily targeting financial institutions as customers – are gaining ground over ‘disruptive’ players that enter the market to compete against those institutions. Funding for collaborative fintech ventures, which accounted for 38% of all fintech investment in 2010, grew to 44% in 2015, with the remaining investments made in ventures that compete with financial institutions. During that six-year period, the percentage of funding for collaborative fintech ventures in North America rose from 40% to 60%.
In Europe, however, funding for disruptors increased from 62% of all fintech investments in 2010 to 86% in 2015.
“The proportion of competitive fintech ventures in Europe and Asia is much higher than in North America, which largely reflects the earlier stages of maturity of fintech markets, particularly outside of London,” said Julian Skan, a managing director in Accenture’s Financial Services group, which oversees the FinTech Innovation Lab London. “London’s welcoming regulatory environment has made a preferred market for competitive fintech ventures to test their propositions. Banks too stand to benefit from this, as it drives momentum to reimagine their own capabilities.”
According to the report, a ‘relatively low’ number of banks invested in fintech ventures last year, accounting for US$5 billion of the US$22.3 billion of reported investments. That compares to an estimated US$50 billion to US$70 billion that banks spend on internal fintech investment each year.
“Banks that excel in assessment and adoption of external fintech disruptions, be they collaborative or competitive, can leapfrog the competition by providing the kinds of digital innovations that consumers have grown to expect from retail and technology giants,” said Skan.
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