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What's Next In FinTech

Learn about the major trends, biggest investments, and key players in FinTech, courtesy of CB Insights and KPMG. 

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Below is a transcript of our webinar, "What's Next in FinTech," led by CB Insights Senior Research Analyst, Matt Wong


QUESTION & ANSWER


“Where are the early-stage investments going within insurance?" (which has been called FinTech's next frontier.) 

 

What we're seeing in insurance is a lot of the deal activity that initially happened in the health insurance space with the passage of ACA, the Affordable Care act, is now shifting to other lines. I think when we look at the early stage activity, we're seeing a lot of startup formation in areas like small business, small and medium business insurance. We're seeing it in areas like renters insurance. And we're also seeing it in newer areas including companies who are building more on-demand insurance models, who are unbundling policy times and coverage times.

 

It's an exciting time. I think when we talked about some of the seed rounds earlier Lemonade is one company here in the U.S. which is trying to be a new peer-to-peer insurance carrier. And then another one which just recently raised funding, Next Insurance, which was founded by the former founders of Check, a bill-pay app that was acquired by Intuit. Both of those, sizable bets. And what we're seeing is a real excitement around these different categories beyond what we earlier saw in health insurance.

 

"What's been the influence of blockchain in organizational aspects? And how does blockchain impact the future of work?"

One of the impacts of blockchain on organization is a lot of people running around and obsessing about it. It takes a disproportionate amount of people's time. A lot of the questions that we get asked are from board level down. "Should I be worried about this?" and "What does it mean for our organization?" And just like everything else in FinTech, I'm talking about established companies now, mainstream companies. Then, "Is this going to eat our lunch or fundamentally change things?"

On the other side of the equation, there is a couple of interesting areas that people are exploring at the moment. One of the areas we've been looking at ourselves as a partner-based organization whether or not we play around with a blockchain in terms of partner credentials, unique identity, those kinds of things. That's one of the areas that people are exploring.

If people are looking at digital identity in the outside world, then they're looking at custom digital identity. One of the questions is should they be using it for staff, digital identity? This is an extension of that, the point I was making earlier. And there are one or two early-stage developments in that area around privileges and permissioning for individuals within organizations. But that's very early at this moment in time. And I'd say those are the key areas that we're seeing people play around with, certainly in financial services.

 

"How might KYC add value for blockchain?”

It's more a question of how blockchain can add value for KYC is the question. It starts with digital identity. I’ll explain the problem statement and then hopefully, that people will see where the technology could play. We have a situation in retail banking and in consumer banking, generally, where a government is guaranteed deposits of current account holders up to a value, and in the UK, that's £75,000. And that's great. It means that if your bank fails, that the government guarantees your money.

 

The problem is one of continuity of service. And if you don't have two bank accounts, and most people don't have more than one, then you need be able to access that money the day after that bank fails. In those circumstances, if you can't passport people across with a unique digital identity, then it has to go through an accounts switching process very quickly. In most markets, that account switching process takes a week or two weeks, or even longer if one bank fails and suddenly, the system is eaten up or exceeds capacity.

 

There are two solutions to that problem, broadly. One is everybody has two bank accounts, which isn't going to happen, because one might be active and one dormant. And the second scenario is that you'll be held centrally with your balance as of last night. And the idea that we've been playing around with one company is whether or not you can hold that. Essentially, blockchain could be a means of holding it, and take the basic identity of an individual with their last account so they can access their funds at Bank B if Bank A fails within 24 hours.

 

Now, if you expand that into general needs reporting with customers of capital markets in investment banks or any of those other areas, then you start to look at what the chain can actually hold in terms of attributes (unique attributes) and can they be constantly updated? In the consumer area, that might be counter to judgments in the UK, or whatever adjudications were taken place against the individual, and therefore, its credit history. Or in more wholesale banking, corporate banking, then it may well be you start with the legal entity identifier and then affiliates and subordinates are documented within side chains or equivalent in those circumstances.

 

"What'll be the role of government in how blockchains can be developed as TCP, ICP?"

The reference point I use for this is, if you take my last example, is about somebody having their consumer or current account deposits guaranteed by my government, then you start to look at other areas where if you are going to hold digital identity centrally, where the government can play. You start looking at passports, you start looking at national health records or centrally held health records or identities. Then you run into an interesting area of data privacy and a trade-off between those two things. On the one hand, somebody might want continuity of service and they demand that. But the trade-off of that is their identity being held centrally and probably in an area which is potentially accessible by government. Because it's going to secured by government, it would have to be. There are some interesting trade-offs philosophically, ethically, morally that people are playing with in those areas as they expand.

 

The other example I would use, a real example, is around things like chip and PIN. If you go back to the first guise of chip and PIN in the early '90s, the first country, really, to roll it out en masse was France, and it was government-backed. And that was developed as a security issue and also an identity issue. Then the UK did it, but it was predominantly private sector, and eventually and more recently, the U.S. has rolled out chip with signature.

 

Governments do have a role to play in those areas and different governments play in a different way. Some of them are more state-sponsored, and some are more private sector-sponsored.

"How soon might we start to see a consolidation of FinTech companies?"

I think one thing that is interesting is we have seen a fair number of acquisitions in the FinTech space in the personal finance space of companies that are facing consumers; so Check, LearnVest, and others.

 

And I think what we're seeing is more of a willingness by large financial services firms to acquire. NASDAQ, for example, made another acquisition today. Goldman Sachs doing its first early stage acquisition last week, and then BlackRock also making its first splash in the FinTech M&A space acquiring FutureAdvisor. We anticipate more big financial services forms to go the M&A route as some of these FinTech upstarts establish enough of a brand and credibility around a lot of the consumer-facing areas.

 

And I think what we will see is more M&A over time, and a lot of these incumbents who are even going earlier in acquiring these companies, maybe one, two, three years after they've been formed, rather than large companies who are at the very late stage, or have already gone public. That's one thing that I do see happening over time.



We’ll start with a comprehensive review of the state of FinTech in 2015, as well as what we're seeing in the early stages of 2016, taking a data-driven look at all the investment trends, companies, as well as investors and FinTech globally.  A lot of the data points come from a report that we put together with KPMG. But excited to get this partnership underway with KPMG and excited to present the array of FinTech activity happening globally with them. 

 

The main areas we’ll cover are emerging activity in blockchain, FinTech trends globally, then geographic segments (North America, Europe, and Asia), and look through some of the investment and startup trends in each of those regions.



Huge sums of money have gone into FinTech in the last 12 months. It’s hard to separate hype from reality in all aspects of FinTech and blockchain is no exception. That's why we decided to spotlight blockchain, starting with some of the practitioner views on blockchain. On these slides, you've got some color and background on the investments taking place in blockchain.


It's not a complete picture, because it's only really looking at the VC side of things rather than necessarily what's going in from 

BLOCKCHAIN & BITCOIN INVESTMENT ACTIVITY
BLOCKCHAIN & BITCOIN DEALS MATURE TO MID-STAGE

The question that a lot of people have got on blockchain still is, "What problems is it actually solving for, or is it a solution looking for a problem to solve?" And what distinctive characteristics does it bring to the table, be they cost efficiency, new levels of standardization, that existing technologies do not provide for? A lot of our clients are looking at these technologies and saying, "Okay, it may be able to solve for this specific area, and it could be in settlement risk or delivery risk, or it could be in digital identity, but does it bring something to the table over and above what we've currently got access to?"


The second thing that people are looking at, and very much this is true for chief investment officers or chief technology officers, is while they want to be able to experiment with the technology, are they prepared to take a risk with it in a live production mission-critical environment? And the answer, for mainstream processing at this moment in time, is that that is limited. It's not a pervasive technology that's starting to be used. Because there's a lot of standardization still required, and there's a maturity curve for the technology to go through before people can really trust it with those mission-critical systems.

 

The other interesting thing is that people focus on the technology itself a lot. And very often, what we find with the adoption of new technologies is that it needs to be aligned to recognition in other ways. If you take distributed ledgers, for the sake of argument, on a cross-jurisdictional basis, can they support the multiple legal infrastructures that they have to be able to support? And in that legal opinion and indeed, the multiple accounting treatments, are they something that can be adopted within the technology as well? There are still elements that need to join up before we see more widespread use, not just technology-wise, but from a legal and a regulatory business perspective, and then a view from within.

 

Another key issue is still, the question of where this sits as a matter of priority. What we're seeing is that the agenda, at board level within many of the financial services organizations, has been driven by regulatory litigation issues, and increasingly, the cost of the business model. When we look at these new technologies in there, and their ability to be adopted and deployed, and solved for real business problems, we ask whether or not they're solving for some of those areas. And that's where 80 to 90% of the spend over the last five to seven years, in major financial services organizations, has actually been. If you throw it in addition to the cyber question and cyber-security.

How does blockchain sit in relation to those other areas? Does it reduce the cost of servicing businesses as much as somebody moving into the public cloud, for the sake of argument, and the power that that can bring to those organizations?

There are a couple of areas, in particular, where we see some opportunity and traction. Moving away from a lot of the coverage that's taken place, be it with the securities processing model, we feel that the question of digital identity and the possibilities for distributed or even centralized ledgers using chain technologies and consensual protocols has got some real value in the digital identity arena.

In 2015 VC-backed fintech companies raised $13.8B across 653 deals

Spotlight: Blockchain

The Hot and Crowded Fin Tech Space

Macro trends in the global fintech landscape

Trends and opportunities in the emerging blockchain landscape

principal investment groups in banks and organizations in the way that they're viewing it. You'll see that there is a degree of plateauing, and you'll also see that some of the organizations concerned are reaching their next rounds of investment.

What we're really seeing, though, is a significant amount of people experimenting with the technology at this moment in time, and not really using it in core, mission-critical systems and infrastructure on a broader basis. That's quite natural for a new technology when it comes along because generally, you need a consistent level of adoption through value chains, be they in securities processing or post rate servicing, or even in payments where a number of people need to be able to access a common version of technology in order for it to make a difference.


blockchain summary

The resolution and solvency models of the banks in multiple jurisdictions require that they have the ability to provide for continuity of service to their client base. And we see possibilities within the blockchain technologies for solving this particular area, and increasing the speed of porting customers from one institution to another. We also see the question of KYC, the “know your client” prerogative being potentially able to leverage these technologies as well. Again, going back to the ability to pull people easily from one place to 

another and share the cost, particularly on low-risk clients, of remediation and servicing clients through KYC regulations.

 

The other and final area is the question of insurance and lending. Which people have focused on more recently around smart contracts? There are certain markets which are small in scale, in terms of number of parties and the volume that goes through, but significant in notional terms. Where historical paper-based environments are still supported. In those opaque markets, we see the possibility of chain technologies having a significant impact, as well as in specialized lending; i.e., the low volume market. Where the characteristics of the product require a number of different updates to the actual product set. And again, the technology lends itself naturally to quite an opaque market.

 

Next we're going to look first at the global macro-trends within FinTech.


There are eight main areas that FinTech encompasses: lending, payments, personal finance, as well as an asset and wealth management, money transfer and remittances, blockchain, distributed ledger, capital markets, crowdfunding, as well as now, we're seeing a lot more activity in the insurance sector.

 

At a macro level, 2015 saw a record amount of money into FinTech startups, so $13.8 billion into venture capital-

backed FinTech startups across over 650 deals. If you look at that on a year over year basis, venture-backed companies actually take just a portion of the overall amount of funding to FinTech. If you think about all of the investments coming from angel groups, angel investors, PE firms, as well as hedge funds and mutual funds and others, the grand total is actually much larger than just the VC-backed portion. But for the purposes of this webinar, we're going to focus mainly on the companies that have taken venture funding.



Here, you'll see that annual number as it reflects venture funding into FinTech startups. 2015 topping the 2014 total by over 100%. Deal activity is also up compared to 2014, and way up compared to just five years ago. But when we take a little bit more of a nuanced view and break down this funding activity by quarter, what we see is that actually, FinTech funding dropped significantly in Q4, as well as deal activity. That’s in line with the broader slowdown we are seeing in venture capital markets. We're seeing lest investments as well as deal activity into the venture backed category as a whole, and FinTech is definitely no exception to that. 


VC-BACKED FINTECH COMPANIES TAKE 73% OF OVERALL FINTECH FUNDING IN 2015
HOW MUCH IS FINTECH FUNDING BOOMING?


And then when we look at the lending space, this was a sector where you could probably count on two hands the number of companies back prior to 2008 who were in this marketplace. That's when we saw OnDeck Capital and Lending Club; two of the early companies in this space that have since IPO'd.


Insurance is an area where we are seeing a lot more activity within the FinTech space. And that's certainly bearing out at the early stage. If you look at just the Seed and Series A activity in the insurance space (below), we're seeing quarterly highs in the last two quarters. We did a recent analysis of the largest seed rounds in the technology sector, and both of them actually went to insurance tech startups in the last five quarters. Insurance is an area we expect to see grow, and most of the activity is in the early stages.


One thing we also have seen is since those companies have gone public, FinTech's most exciting exited companies, they have under-performed the S&P 500. This is a chart looking at the stock performance of OnDeck Capital, Lending Club, and Square. All of them under-performing in the S&P since their IPOs.



Blockchain is one of the areas of FinTech where we're anticipating more activity. But here, you see that breakdown of billion dollar companies and where most of the value has been accrued thus far. You see payments with lending taking the majority of that.


When we look at the individual funding breakdowns for these main spaces payments also saw a slowdown in Q4, as we mentioned, along with the rest of FinTech after several quarters where funding either touched or was close to $1 billion overall. You see some of the major deals there on the right; Affirm and Zuora (which is a bill pay company here in the U.S.) and One97 in India, which is focusing on mobile wallets and payments.


What all this is doing is creating a segment of very well-funded and highly-valuable companies in the FinTech sector. When we look globally, there are now 19 companies that are valued at over $1 billion (unicorn companies) within the FinTech sector. Most of the companies have been centered in the payments as well as lending tech. But we are seeing others now emerge. In insurance, we see a couple of firms there: Zenefits and Zhong An Insurance, an online PNC insurer in China.


And one of the main participants now in this FinTech ecosystem is the rise of corporations. If we look at the past three quarters from a deals perspective in FinTech, corporations as well as their venture arms are taking now almost one fourth of all deal activity or participating in one fourth of all deal activity within the FinTech space. That's a significant change from just a few years back. we're seeing this not just from tech investors, but financial services firms too.


You can see North America and Asia both increasing significantly, as well as Europe increasing significantly in terms of these $50 million financing rounds to FinTech from just a few years ago, and we're seeing less than five in total across the three major geographies. These giant rounds are coming from a number of different investors as we'll touch on later, and are driving the influx of funding into the category.


After we saw several big mega rounds in Q3 including SoFi (a marketplace lender here in the U.S.), which raised over $1 billion in the financing round. That really cooled down in Q4, and we saw activity levels not seen since 2014 and earlier. This is definitely a trend to keep in mind heading into 2016.

 

One of the big reasons why we saw the influx of funding into FinTech as a whole in 2015 was these so-called "mega rounds," right? The chart below shows the influx of $50 million in financings to VC-backed FinTech companies by geography.  

Q4’15 FINTECH FUNDING SEES STEEP DROPOFF AS DEALS SEE LOWEST QUARTERLY TOTAL OF 2015
MEGA-ROUNDS A HUGE CONTRIBUTOR TO FINTECH’S 2015 BOOM, BUT SLOWING DOWN
CORPORATES PARTICIPATE IN 1 of EVERY 4 FINTECH DEALS
19 FINTECH UNICORNS AND RISING
VC-BACKED LENDING TECH SEES DEALS AND DOLLARS DROP IN Q4’15


Of course, financial services incumbents haven’t sat on the sidelines. Here, you see four of the ways where they've actively made moves. Whether that's investments we've mentioned; the major bank investments into VC-backed FinTech companies, partnerships. Some of the notable ones that we've seen over time include Lending Club and Citi, as well as J.P. Morgan and OnDeck Capital in the lending space. And then a number of acquisitions, so that's happening across 


And that's not just in the U.S., but also in Europe where see a host of other startups who have emerged in Europe and internationally to also focus on attacking the individual pieces of a bank through new data-driven, and better UIs in terms of financial services tech.

different areas of FinTech, both as it pertains to wealth management, bill pay, and other consumer-facing areas. Some of the acquisitions there include Honest Dollar, which was acquired by Goldman Sachs just last week, as well as a few others like LearnVest, as well as Check, which were acquired by Northwestern Mutual and Intuit.

 

And lastly, you see startups who are also directly now going and competing with large corporations. Incumbents aren't afraid to fight back and actually respond directly to them as you see there in a response by Charles Schwab to the robo advisor WealthFront.


The reason why a lot of corporations and banks included are investing in the FinTech space is because of just the sheer number of companies that are targeting the individual applications within banks. Here you see a graphic that we put together called "The Unbundling of a Bank," where you see all the different startups that are targeting the individual service lines of a bank. Not going after the bank as a whole, but just picking off the small relationships that banks once had directly with our customers. 

they also notably invested in a number of big data applications within FinTech. Kenshu is a company in Cambridge that they invested in earlier, and you see a host of others there as well.

When we look at Goldman Sachs, we see Goldman a bit more active than J.P. Morgan on the FinTech front, but also placing bets throughout these thematic categories that have come about within FinTech, including personal finance management, lending, and blockchain, of course. Goldman made an earlier investment into this space with an investment into Circle Finance last year. It's a payments company which integrated Bitcoin.

 

And you see here, the number of different bets;


Here, we'll take a closer look at J.P. Morgan and you see where their core investments have fallen within different categories in FinTech. They invested in Square prior to its IPO. In the marketplace lending space, they have an investment in Prosper, and now also investing into blockchain startups such as Digital Asset Holdings, as well as the r3cub partnership between banks to find ways where blockchain can apply in bank contexts.


Below you see that it's also hitting the banks now. Major banks are not sitting on the sidelines and are also investing directly in this space. When we look at the different banks who are invested into venture-backed FinTech companies, that includes the big names like Goldman Sachs, J.P. Morgan, and then Citigroup, which has been highly active through its corporate venture arm, Citi Ventures. And you see a host of the other banks there who are getting involved now; Wells Fargo and Morgan Stanley, as well as others.


And it's not just here in the U.S., it's also in Asia. Below you see a few of the global corporations who are also interested in FinTech. I mentioned SoftBank's earlier mega investment into marketplace lender SoFi. But you also see a few others. Renren has been notably active, the Chinese social networking company, which has invested in Motif, SoFi, LendingHome, and others. You see Pingan Ventures, which is the venture arm of insurance carrier Pingan in China. One that's also not here, but is notable is Rakuten in Japan, a big eCommerce corporation, which just devoted a portion of funds into investing solely in FinTech.


And it's not just VC investors, it's spanning across corporates including non-financial services corporations. The image below shows Google, Intel, and Salesforce all doing a number of deals in the FinTech space. Google Ventures is actually among the active investors overall in FinTech, investing in companies across the lending, personal savings, as well as stock trading apps like Robinhood. And you see Intel and Salesforce. Salesforce actually just recently invested in an insurance tech startup there on the right, FinanceFox.


One application of that Business Social Graph is to show the number of FinTech investors over time. If you look at 2010, there were just over 200 investors in FinTech startups; that includes VCs, angels, and other investor types. But if we fast-forward to 2016, we see that there are now over 900 different investors in the FinTech ecosystem.

The image below comes from a tool here at CB Insights called the Business Social Graph. We use it to visualize investments, acquisitions, competitors, as well as partnerships throughout the ecosystem. We'll be using this tool to map different players in this space.


Looking at exits, we saw an influx of M&A in the first few quarters of 2015. But exits have also dropped. If you think about some of the largest FinTech exits to date, most of those have dropped too. Square being the exception in Q4, Lending Club and OnDeck were both in 2014. We haven't seen that many large exits and it's been a knock on the FinTech sectors. 

VC-BACKED PAYMENTS TECH FUNDING FALLS IN Q4’15
EARLY-STAGE INSURANCE TECH DEALS HEAD TOWARD RECORD HIGH
FINTECH IPOs UNDERPERFORMING THE U.S. MARKET
FinTech Exits Fall


And here now, you'll see the last five quarters of activity: you see some of the mega rounds continuing; I mentioned SoFi’s round in Q3. But we did see again, a drop-off in Q4. If you were on OnDeck Capital's earnings call, they mentioned anticipating these being the latter days of company formation in the lending space. When we do see activity, we anticipate lending changing from early marketplace lenders to now, you're seeing a lot more activity around infrastructure data and other applications.

THE BUSINESS SOCIAL GRAPH
FINTECH IS ALSO ATTRACTING NON-FINANCIAL SERVICES CORPORATIONS (UNUSUAL SUSPECTS)
GLOBAL CORPORATES ALSO INTERESTED IN FINTECH
CITIGROUP, GOLDMAN SACHS LEAD MAJOR BANK INVESTORS INTO VC-BACKED FINTECH STARTUPS
ANALYZING JP MORGAN CHASE
THE UNBUNDLING OF A BANK
ANALYZING GOLDMAN SACHS
THE UNBUNDLING OF A BANK – INTL EDITION
THE INCUMBENT RESPONSE
DIGITAL BANKING FUNDING HAS JUMPED MORE THAN 10X SINCE 2010


When we look at the corporate trend, Europe actually is much different than what we've seen across North America and Asia. Actually, for four of the past five quarters, we saw less than 15% of deal activity. Two VC-backed FinTech companies include a corporate or corporate venture arm in Europe. The reasons for that are a bit unclear. There are definitely European banks who are quite active investing in FinTech; Santander Ventures is one. BBVA, which was just recently shifted into Propel Ventures is another.


When we look at the deal share by stage, what's interesting is we're actually seeing a surge of early-stage seed activity in Q4, which we saw rise to a five-quarter high in Q4. 40% of deal share went to seed activity in Q4. That was different from Q2 where we actually saw a number of Series A investments into European FinTech companies. It's interesting to see this shift where we're still seeing a healthy amount of seed activity in Europe.


When we look at the five-quarter trend, it's definitely more steady than what we're seeing in North America and we'll touch on Asia later. But the deal activity has been very steady across the five quarter trend in Europe. Where we're seeing a relatively steady amount of investment into FinTech companies in Europe. It’s much different than what we’ve seen and a much bigger downturn in Asia and also in North America.


Next, I'm going to go through quickly through Europe and what we're seeing in the European FinTech sector. Here, you see the five-quarter trend to VC-backed FinTech funding. For the second year in a row, we saw over $1 billion invested into FinTech companies in Europe; $1.47 billion invested in European FinTech companies in 2015. And you see definitely the increase in deals; over 120 deals to European FinTech companies.

California and New York have been the two main areas of FinTech investment. And here, you see the trend over five quarters. New York, actually much smaller than California from a dollars perspective, but you see the increasing amount of FinTech investment activity in New York over time:


Here, I'm just going to take a quick look at some of the major VC investors into FinTech. Not surprisingly, a lot of the multi-stage venture firms in Silicon Valley are actively investing across FinTech, including Andreessen Horowitz, Khosla Ventures, Spark Capital, and others. And then you see some of the more niche firms who are more FinTech-focused; QED Investors, Blochchain Capital, for example. But here are just some of the names investing in the FinTech sector broadly.


VC participation is similar to what we saw globally in North America. In Q4, we saw one-fourth of all activity include a corporate or corporate venture arm. North America is mirroring what we see globally in terms of corporate activity into the FinTech sector.



When we look at some of the deal share by stage, we are seeing increased activity at the Series B over the mid-stage. A lot the companies that received early stage funding graduate to Series B and Series C funding. Series B deal share rose to a five-quarter high in Q4. At the same time, we did see seed activity match a five-quarter low in Q4. This is definitely something to keep in mind as we think about the early stage activity and trends heading into 2016.



When we look at the later-stage deal sizes, you do see that notable drop-off between Q3 and Q4 from $75 million when we saw a lot of these influx of mega rounds in Q3 to just $38 million Q4. It's a trend to keep aware of. It's coming back to earth in terms of some of these late-stage companies that happened in FinTech in Q3.


When we look at the five-quarter trend, though you do see that drop-off in Q4. Whether this will continue in 2016, it's uncertain thus far. We are seeing a steady amount of deals thus far into 2016. But whether we see some of those bigger mega rounds bear out, it will definitely be of interest in FinTech as we think about what's going to happen in 2016.


Now, what we're going to see is some of the geographic trends. I'm going to brush through these very quickly around the three main areas within North America, Europe, and Asia. Here, you see the influx of funding to North America in FinTech; $7.7 billion invested into venture-backed FinTech companies in North America in 2015. You see some of the mega rounds listed, SoFi, Affirm, and Credit Karma are among some of the companies that have taken rounds over $100 million in FinTech in 2015.



Early-stage, we're still seeing a number of activity at the early stage, but we are seeing it plateau a little bit. 2015 saw just one more deal than 2014 in terms of early-stage FinTech. Although we are seeing a continued amount of big funding investments into the early stage activity. 2015 surpassing 2014's total here.

across the landscape to really form UI- and data-driven applications to target them in better ways. We've seen that borne out across these different areas, including crowd-funding, marketplace lenders, different payments apps, and now also into the insurance base where we're seeing different companies build these new UIs and new distribution platforms to target millennials. Here's just a quick look at some of those companies:

When we look at where the bulk of funding is really increasing, what we've seen over time is digital banking being one of that key area. If we look at just the companies that are directly facing personal consumers, the funding to those companies has taken off enormously, jumping from just $2 billion in 2014, to over $6 billion in 2015, and definitely not slowing down.


And a large part of that is because of the millennial segment. There was a recent poll that said that 60% of all financial products are not targeted at millennials. Now what you see is an opportunity for upstarts 

THE GROWING CROP OF FINTECH STARTUPS FOR MILLENNIALS
EARLY-STAGE DOLLARS CONTINUE TO PILE INTO FINTECH

FinTech Trends:  North America

FinTech Trends:  Asia

FinTech Trends: Europe

MEGA-ROUNDS BUOY NORTH AMERICA FINTECH FUNDING TO $7.67B ACROSS 378 DEALS IN 2015
OVERALL INVESTMENT TO VC-BACKED NORTH AMERICAN FINTECH STARTUPS PLUNGES IN Q4’15
LATE-STAGE FINTECH DEAL SIZES COME BACK TO EARTH IN NORTH AMERICA IN Q4’15
SERIES B DEAL SHARE RISES TO 5-QUARTER HIGH AS SEED DECREASES
CORPORATE DEAL SHARE OF VC-BACKED NORTH AMERICAN FINTECH COMPANIES RISES FROM Q3
THE MOST ACTIVE VC INVESTORS IN NORTH AMERICAN FINTECH
CALIFORNIA VENTURE-BACKED FINTECH INVESTMENT ACTIVITY
NEW YORK VENTURE-BACKED FINTECH INVESTMENT ACTIVITY
VC-BACKED EUROPEAN FINTECH FUNDING HITS NEW HIGH
FinTech Funding and Deals in Europe Drop in Q4'15
EUROPEAN FINTECH SEED DEAL SHARE SPIKES IN Q4’15
Corporate Participation in European FinTech Deals Drops to 10% in Q4'15

Here, you'll see some of the most active venture investors in Asian FinTech; a number of investors across China, Asia, as well as others. Japan, you see Mitsubishi and some others there invested as well. And China, definitely what's interesting is while we did see a drop in deal activity in 2015 to venture-backed companies in this space, we did see a step increase in funding. $2.6 billion was deployed to VC-backed FinTech companies in Asia; Zhong An Insurance is one company in the insurance space that is set to go public, and I think they see an $8 billion valuation in China. Lu.com, another big one there, and they took an influx of capital as well in 2015.

have really tried to establish a foothold in financial services also investing in some of the leading companies in China and in Asia as well.


Asia has also seen the largest amount of corporate activity into the investment trends in FinTech. 40% of all deals in VC-backed FinTech companies in Asia included corporate or a corporate venture arm. This is a higher increase than what we're seeing in North America and certainly in Europe. And also, a reason why we're seeing large strategic investors if you think about Alibaba, Tenzen, and others in China who 


And when we look at the deal share over time in Asia, what we're seeing is that seed deal shares actually dropped to a five-quarter low in Q4 '15. And we're seeing activity shift towards the mid-stage. What's interesting is these large rounds in Asia that are happening across the ecosystem are happening at all stages. And we're seeing an influx of capital deployed both in some of these more strategic deals and others.


Interestingly, actually, Asia might have seen the largest drop-off in terms of funding activity in Q4 where we saw these billion dollar quarters Q2 and Q3, and then a large drop-off in Q4. That's because a large portion of FinTech activity in Asia is driven by mega rounds that we saw in 2015. You see here, the increase in early stage deal sizes over time. Early-stage FinTech deals in Asia continue to rise to new highs.


Lastly, we’ll go through what we're seeing in Asia. Asia was interesting in that we really saw Asia have its FinTech moment in 2015. Over $4.5 billion was invested into Asian FinTech in 2015; that's a notable increase from what we saw in years prior, quadrupling the total that we saw in 2014.


When we look at India, we also saw an enormous increase in funding to Indian FinTech companies. Two of the companies there focused on marketplaces for financial services; BankBazaar and Policybizaar was raised, and One97, which has been raising the majority of funding in Indian FinTech including the firm Alibaba in China and others. 

Germany, just quickly definitely not the same level of funding totals that we've seen in the UK, but an upward trend in terms of FinTech funding to venture-backed companies in Germany, and we're seeing that increase over time as well.


What you're seeing here is this influx of funding to these new challenger and neo banks. Atom Bank and Starling both raising large rounds since the start of 2015. And you see how that funding trend is bearing out between the number of these companies across Europe. BBVA, has acquired both Simple and Hovi, and then with that big investment in Atom Bank. Here you see that breakdown of companies by disclosed funding. 


The UK definitely saw a high in 2015 in terms of FinTech funding driven by a lot of the mega rounds there. You see Funding Circle raised $150 million; WorldRemit on the remittances side raised $100 million. And Atom Bank, which is this new group of challenger banks that has emerged in Europe, raising $128 million largely from BBVA, which also acquired a neo bank in North America and Simple.


Here, you'll see some of the major FinTech investors in Europe; Index Ventures, Balderton Capital, Excel Partners who, by and large, are some of the most active investors in Europe overall, but we're seeing other investors there; Anthemis Group, one firm that's very FinTech focused, and you see a few others there who are investing broadly throughout European FinTech. 

But we do see less activity on the corporate front into European FinTech companies than their counterparts in North America and Asia. Whether that'll change is to be determined, but it's an interesting trend that's borne out in the data. 

Most Active VC Investors in European FinTech
UK Venture-Backed FinTech Investment Activity
Within FinTech, Investors Turn an Eye towards Digital Challenger Banks
Germany Venture-Backed Fintech Investment Activity
Asia: 2015 FinTech funding tops $4.5B
Asian Funding Dollars to VC-backed companies dives in Q4'15
Asian Early-Stage FinTech Deals Rise for Fifth Straight Quarter
Asian FinTech Seed Deal Share Falls to 5-Quarter Low
Asian Corporates Active in 40% of FinTech Deals
Most Active Asian FinTech VCs
China Venture-Backed FinTech Activity
India Venture-Backed FinTech Activity