Financial technology, now known widely as ‘fintech,’ is defined as software/technology platforms that automate and facilitate financial processes. Fintech has been transforming the way we interact with finances since its emergence in the 21st century and has continued to grow ever since. With the advent and solid growth of firms such as Nutmeg Saving and Investment Limited, Monzo Bank Limited and Crowdcube Limited, access to fintech companies is more and more viable, not only for companies, but for consumers as well.
Record Fintech Deals
2018 was a record year for private equity-backed (buyout and venture capital) investment in fintech, with 139 deals announced or completed at an aggregate value of $34bn. Refinitiv, which claims to be the world’s first fintech company, was bought in a deal valued at $17bn, attracting investments from some of the biggest names in private equity, including CPP Investment Board, Canson Capital Partners, GIC and Blackstone Group. In the venture capital space, 2018 marked an annual record for fintech investments: $30bn was invested in the sector by venture capital firms, spearheaded by Ant Financial Services Group’s $14bn Series C financing which was co-led by GIC and Temasek Holdings.
Competition at the Top
Home of the startup, North America has historically dominated the fintech investment sphere. Yet, consistent with the picture for the overall private equity & venture capital market, China is piling on the pressure. Figures for North America have dropped quite considerably from 2013, when the region accounted for 60% of the number of venture capital investments in fintech globally, down to 32% in 2018. Over the same time, Greater China has been on the rise, with its share of venture capital fintech investments increasing from 7% to 26%. This trend is also reflected in aggregate deal value, where North America’s proportion of total value has dropped from 59% to 14% in 2013 and 2018 respectively, and Greater China’s has risen from 7% to 78% –notable investments in Hangzhou Mouth Phase Communication Network Technology Co., Ltd. and JD Finance helped to drive the total figure upwards.
What Does the Future Hold?
The evolution of fintech reached a peak in 2018. Will this growth continue into 2019? There were 462 private equity & venture capital investments in fintech companies in H1 2018, at an aggregate value of $48bn. Compare that with the 223 transactions valued at $31bn so far this year to date and you could say that the likelihood of another standout year is low. That being said, the continued focus on technology to innovate company functions and differentiate services means that fintech investment looks to be in good stead for years to come.
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