Savings & Investments

Another record-breaking year for fintech investment

Published on November 21st, 2016

Investment in fintech broke all records during 2015 with just over US$19 billion injected into the industry. This led some to predict that the party would come to a halt in 2016, especially since many startups scoring large initial funding rounds since 2012 have failed to bring the expected disruption. We’re at the tail-end of 2016, however, and this train shows no signs of stopping. According to consulting firm Accenture, investment continues to soar and had already reached US$22.3 billion by the middle of the year, growing 75 percent over the previous year.

In its fintech report looking at the evolving landscape, Accenture states that much of this confidence has been driven by two Chinese deals early in the year – involving Lu.com and JD Finance - each of which topped the US$1 billion thresholds. In fact, the rise of Asia-Pacific (APAC) has seen investments in the region quadruple in 2015 to reach US$4.3 billion. This has made it the second-biggest region for fintech investment after North America which accounted for 19 percent of global financing activity. While China accounts for 45 percent of fintech investments in APAC, India is a close second at 38 percent and is growing fast. Accenture identified Mumbai, Bangalore, Tokyo, and Beijing as the major fintech hubs in the region by a number of deals. It’s been four years of strong industry growth. Hardly surprising given that technology permeates virtually every aspect of business today, but the financial world has been slow to catch up. Money is an ancient technology that predates writing and underpins all human trust. It changes, but slowly.

But change it must, and the companies working to disrupt the way we use the stuff now number 8000, by analyst’s best estimates. KPMG also recently issued a report finding that traditional financial institutions and banks are starting to realise the opportunities associated with fintech and themselves working at the forefront of innovation. They are not necessarily linked to making massive financial investments, but instead identifying the best opportunities internally.

According to KPMG, funding and deal activity for venture capital-backed fintech companies are expected to approach $15 billion across more than 820 deals by the end of the year which would make it the best year ever for the sector. Furthermore, KPMG has identified insurtech as an area to watch. In the first half of 2016, it had reached US$1 billion in funding across 47 deals with health insurance-related startups claiming the three largest deals in that period.

Of course, this is just one area. Accenture feels that banks are recognising that fintech companies pose more of an opportunity than a threat. This provides aspiring start-ups in this segment with additional prospects either working with banks or doing something on their own. With Accenture pointing out that the banking landscape is not only changing in the front office but on core processing functions as well, the changing model is playing into the hands of fintechs.

From an African perspective, this is where the continent could really start coming into its own. We have long been viewed as a place that can take what is happening elsewhere in the world and add our own African flavour to it, often leapfrogging legacy technology.

The same holds true in the fintech space.

According to research by Legato Consultancy on payment developments in Africa in relation to the fintech industry, the almost 300 million internet users on the continent present significant avenues for growth. It estimates that the mobile telecoms market in Africa is worth US$60 billion with almost US$54 million spent in the fintech market space up until the first half of 2016.

Just examine the DNA of AlphaCode Club members, who collectively cover the entire spectrum of industry verticals, bringing their own unique twists and spins to traditional solutions.

Fintech businesses are increasingly looking at ways of reaching the unbanked and developing cost-effective solutions for people to leverage their mobile devices and limited connectivity with smarter and more innovative solutions. We are already seeing fintech being the focus of many existing businesses as they seek ways of diversifying into a more digitally-natured environment. The coming months will show traditionalists just how far fintech has come, more so when looking at the talent that exists in Africa.

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