The quality, and perhaps the maturity, of the fintechs competing in the Fintech Awards Luxembourg 2018 has us convinced: these companies are slowly, but deeply, recoding the norms of the financial sector. And the new Pulse of Fintech, a biannual report highlighting activities and trends in fintech, supports this conclusion with numbers.
2018 at a glance
According to the report, two large deals in particular have sparked the fintech market in 2018: Ant Financial raising $14 billion and WorldPay’s acquisition for $12.9 billion.
In the first six months of 2018, global investment in fintech companies hit $57.9 billion across 875 deals.
Our colleagues, the fintech experts who compiled the report, arrived to three big conclusions:
- Investments in blockchain aren’t just on exploratory, experimental levels anymore—the cash has gotten serious. Investments are largely focused on experienced companies or consortia instead of new entrants.
- The hottest area in fintech seems currently to be artificial intelligence and data analytics.
- Insurtech is growing, with a focus on embedded offerings. Alliances and partnerships litter the insurance industry as everyone is chasing the best customer experience—take AXA connecting its customers to ING’s value chain, for example.
The fintech market globally continues to broaden and diversify. Geographically, we are seeing more activity and bigger deals in less traditional markets like Brazil, Japan, and South Korea. We are also seeing a mix of fintech sectors drawing increasing interest, including data, AI, regtech and insurtech — and combinations thereof that provide more value to customers. This diversification across countries and products will likely keep the fintech market strong for the foreseeable future.
—Ian Pollari, Global Co-Leader of Fintech, KPMG International
The European fintech market
Europe remains a strong force in fintech development with a total of $26 billion in investments in fintech companies across 198 deals. However, due mainly to a lack of regular high-VC investments (like in the US), these numbers are more modest than those in Asia and the Americas. Rather than fintechs, VC investors in Europe seem to focus more on mature companies—supporting more Series B and Series C stage deals.
Increasingly, however, banks in Europe are setting up VC funds to make fintech investments. These investments are diversified, though focus more on artificial intelligence and regtech. Interest in the latter probably grows out of the now implemented GDPR and PSD2, which spell certain opportunity. Additionally, challenger banks have continued to grow thanks to a supportive regulatory environment.
Luxembourg more promising than ever
Many fintech hubs have emerged in Europe, and Luxembourg’s is as promising as any of them. The small country has fostered an ecosystem that is growing fast with new incubators, service providers, and young companies. Notably, startups can find opportunities to collaborate with incumbents and to draw on the country’s long financial experience and expertise, underneath which the government is keen on swiftly and proactively updating its regulatory scene in a way that maximises Luxembourgish companies’ competitive advantage.
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