Investment landscape in the fintech industry: prospects outlook

29 November 2017

Fintech startups are increasingly attracting capital both from venture capital firms and individual investors, as well as from large corporations cherishing their ambitions to expand even more to cover as many innovative and, which is more important, profitable industries as possible. It was only a short time ago, when Ant Financial explained its position on the potential IPO launch, saying it has no plans to go public yet, as its top priorities are investments into artificial intelligence and innovative technologies. Well, where is the money circulating in large volumes in the fintech sector and which of the fintech categories have investment potential?

Geographic allocation

It would be quite fare to start our investment rating story with this category, as we should know, which countries attract more investments into their fintech projects. KPMG Pulse of Fintech report citing the figures for Q2 2017 unveiled that the volume of global investments into the fintech sector in the second quarter of 2017 increased to $8.4 billion from $3.6 billion recorded in the previous quarter.

Geographic allocation

The investment race was led by Canada, where one single deal, a takeover of Toronto-based financial technology provider DH Corp valued at $3.6 billion stood for over the half of the total fintech investment around the world.

Canada was followed by the United States and Europe, where investments into the fintech startups amounted in total to $2 billion each. The reported showed that Asia was weak on investments in the second quarter, unlike the previous year, when China alone accounted for 90% of all fintech investments in the region totaling $10 billion from 55 deals. In Q2 Asia saw just $760 million invested into the fintech industry.

Industry by industry

Payment services

The takeover deal made by Vista Equity Partners with DH Corp shows that payment technologies providers still represent an attractive business for investors, as customers continue using banking and electronic payment solutions for their daily tasks. This fact was earlier confirmed by the megadeal in China, where Ant Financial attracted $4.5 in the fundraising round last year.

Cloud-based solutions

During the second quarter of 2017 the second largest deal in the Top 10 fintech deals was the acquisition of Tagetik, a developer of cloud and on-premises corporate performance management technologies, by Wolters Kluwer Tax & Accounting. The takeover resulted in the formation of a new company named CCH Tagetik: apparently a composite name from CCH, a provider of provider of tax, accounting and audit solutions, owned by Wolters Kluwer, and Tagetik.

The second largest deal in the same category was the fundraising round held by AvidXchange in Q2. AvidXchange, providing cloud-based automated bill payment and accounts payable solutions, successfully raised $300 million the investment session led by Mastercard, Peter Thiel and Canada’s second largest pension fund, Caisse de dépôt et placement du Québec.

Cloud-based solutions

Insurtech

Bright Health, a Minneapolis-based insurance company, raised $160 million in the fundraising round this year led by Greenspring Associates with the participation of such new investors as Greycroft Partners, Redpoint Ventures and Cross Creek Advisors, as well as existing partners like New Enterprise Associates (NEA), Bessemer Venture Partners, and Flare Capital Partners.

Cryptocurrency

Reports posted this week by major media sources unveiled that Coinbase, one of the largest digital assets broker with the headquarters located in San Francisco, California, has left behind the second largest brokerage firm, Charles Schwab by the number of active accounts. As of October Charles Schwab had 10.6 million active brokerage accounts, while that of Coinbases was at the mark of 11.7 million, a 148% growth above the figure reported last year. In November the number of users recorded for Coinbase was 13.3 million.

During November 29 trades Bitcoin reached the record high value of $11,300, making a rise by $3,100 in a matter of one week. Just remember the times, when Bitcoin was valued around $2 per one BTC, and this dramatic soar above all expectations is a demonstration of great potential featuring cryptocurrencies today, despite the statements made by analysts about volatility of Bitcoin, which exceeds seven fold that of gold and eight fold that of the US dollar.

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