Fintech investments will also remain strong in regulatory technology (regtech), artificial intelligence (AI) and Internet of Things (IoT) enablement.
2017 was a great year for fintech mainly because global investors are making targeted investments on value and long-term sustainability in the market. Global research firm, KPMG, has said that the total global investment in fintech remained steady in 2017 at over USD 31 billion, year-over-year.
The report also found that technologies such as Insurtech and blockchain accounted for USD 2.1 billion across 247 deals and USD 512 million of investment across 92 deals res.
In 2018, fintech investments will remain strong in regulatory technology (regtech), artificial intelligence (AI) and Internet of Things (IoT) enablement.
One of the important findings of the survey was that fintechs are maturing beyond their niche beginnings. According to the report, fintechs are maturing in areas such as payments and lending while more established fintechs are now looking to move beyond niche markets to offer adjacent services and, in some cases, full stack solutions.
Blockchain is being seen as a major technology investment in 2018. According to the report, Blockchain garnered a significant amount of attention from investors in 2017, with VC investment in particular achieving a record high of USD 512 million.
The report highlighted that 2018 may be the year when companies finally see production capable blockchain solutions.
Insurtech, on the other hand, is expected to hit its stride in terms of investment, according to the report. In 2017, insurtech was a hot area of fintech investment globally, with VC investment in particular reaching a record high of USD 2.1 billion in 2017. KPMG notes in the report that traditional insurance companies are expected to take innovation up a notch, while blockchain consortia are expected to expand and further develop and test specific use cases. Additionally, enterprises are also expected to increase their focus on the application of AI in insurtech in order to make processes, such as underwriting, more efficient.
B2B focus continues to be a key investor priority
Fintech focused on the B2B market, including payments platforms, SME lending platforms and SaaS solutions aimed at making back office processes more efficient and effective remain a priority for fintech investors. Globally, many financial institutions face significant financial pressures and challenges, particularly related to regulatory reporting and compliance. With regulatory requirements only expected to rise in most jurisdictions, regtech solutions are becoming key focus area for B2B investors and corporates.
Characteristics of fintech investors changing
While venture capital (VC) fintech deals volume has declined significantly over recent years, particularly at the angel and seed stage levels, this decline is partly a result of the evolution of fintech as a whole. Both fintech companies and investors have matured significantly — with maturing companies looking for bigger rounds of funding, and investors shifting their focus from making widespread investments into placing bigger bets aimed at achieving value or sustainability.
Corporate investors becoming more strategic
Globally, corporate investors have also changed their approach to investing in fintechs. Initially, many corporates took a portfolio approach to fintech investing — providing smaller pools of money to a larger group of fintechs in order to develop a better understanding of opportunities and innovations. Now, corporate investors have become confident as to how fintech can help them achieve real value and are focusing on making strategic investments that can help defend their profit pools or help them explore or expand into adjacencies.