A Rosy Outlook for FinTech and Blockchain

KPMG, one of the world’s biggest tax advisory and auditing firms, released their twice-yearly “The Pulse of Fintech” report on July 31. It offered a rosy outlook for the space, revealing a significant uptick in venture capital, private equity, and mergers and acquisitions deals through Q1 and Q2 2018 on a level that already exceeds 2017’s overall totals.

Two massive deals accounted for the healthy growth: Alibaba’s fintech affiliate Ant Financial raised $14 billion during Q2, while Vantiv acquired WorldPay for $12.9 billion in Q1. While transactions that massive were relative outliers during the first two quarters, fintech market activity is rising worldwide – traditional power-players in the US, UK, China, and India continued to enjoy healthy growth, while relative newcomers France, Switzerland, South Korea, and Japan saw their own significant deals.

Angel and seed financing dollars have steadily declined across industries in recent times, but fintech has thus far proved largely immune. The report recognizes the sector’s core attributes – “well-defined market opportunities in its major segments, long-developing innovation cycles, and significant growth opportunities amid the best-developed segments” – as reasons for the continued uptick, though it did note that the sector is not immune from volatility.

Blockchain continues to attract attention from investors around the world, with most activity in 2018 being focused on “more experienced companies and consortia looking to obtain additional rounds of funding” instead of startups. Supply chain management was highlighted as a burgeoning area of interest for blockchain-focused companies, with the US being “particularly active on the blockchain front, with total investment in the first half of the year already exceeding the total seen in 2017.”

Interest “was not limited to one jurisdiction” – the report listed “good-sized” funding rounds of $100+ million to R3 and Circle Internet Finance in the US and $77 million to France’s Ledger as notable deals. KPMG found that ICOs “continued to garner interest globally, despite countries like China banning the practice,” but did not offer predictions as to the future global regulatory climate.

Fintech and blockchain funding are on pace to pass their 2015 peak, with $57.9 billion spent through Q2, and global tech leaders like Google, Amazon, and Microsoft are hiring experts to drive their respective expansions into the space.

Investors are taking note of the bright outlook for fintech and blockchain going into Q3 and Q4 2018 – Ian Pollari, KPMG’s Global Co-Leader of Fintech, pointed to geographic diversification, as well as interest in new fintech sectors, as harbingers for future growth. “The fintech market globally continues to broaden and diversify,” said Pollari, specifically mentioning Brazil, Japan, and South Korea. “We are also seeing a mix of fintech sectors drawing increasing interest, including data, AI, regtech and insurtech – and combinations thereof that provide more value to customers. This diversification across countries and products will likely keep the fintech market strong for the foreseeable future.”
 

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