Europe has seen its highest levels yet of venture investments in fintech companies according to a report by KPMG. Almost $1 billion was invested across 89 deals, with VC investment accounting for $610 million during the first quarter of 2017, in a sign that a shift in focus may be happening from America to Europe.
Britain accounted for half of the top ten deals in the continent, with Germany taking another three, suggesting that any Brexit related uncertainty is having little impact.
US, twice bigger than both combined, had a $1.5 billion investment in Fintech while Asia droped to around half a billion. Overall global investment stands at $3.2 billion during Q1 2017.
Blockchain investment cooled down a bit, according to the report, but “interest continues to build” says KPMG’s Pulse of Fintech. The reason for a slight slowdown may be due to a new trend, RegTech, which is gaining traction.
Regulatory Technology, or RegTech, is the smartification of compliance processes, low level legal administrative duties and potentially contracts through a combination of technologies such as ethereum’s smart contracts, data analytics, algorithms, and other tech fields, to, in effect, automate the processes and make them dynamic.
It is very much at an embryonic stage, requiring plenty of initial investment and resources, but the potential cost savings and efficiency increases are likely to be considerable, thus gaining some traction.
Another somewhat related field is InsurTech or insurance technology, which uses the same basic process of combining blockchain technology, data analytics, algorithms, etc, to automate many of the processes while reducing fraud.
According to KPMG, investment in insurtech slowed down slightly to $243 million after strong growth in 2016, but the slowdown is not expected to last as pressure is increasing for insurance companies to embrace insurtech, says KPMG.
The key trend to watch is artificial intelligence, according to the report, which is a catch-all term that includes smart data, predictive analytics, blockchain, sensors, cloud computing, etc. Another trend is Europe’s open banking and API offerings.
In this specific regard, Britain in particular has made strides, with UK’s Payments regulator ordering banks to open their data some months ago. This will likely benefit new entrants and smaller companies while potentially opening the way for innovative banking methods.
The key insight here, however, may be that UK’s all embrace of fintech through an innovative regulatory approach which includes a sandbox may be paying off, attracting investment while driving forward this space, potentially leading to the boom Europe is now seeing in fintech investment.
Asia, which includes China, on the other hand, has cooled down to around half a billion while America still keeps talking about “responsible” innovation while seemingly showing no responsibility at all in its regulatory approach.