B2B Payments

B2B Startups Lead FinTech Investment Rebound

Good news for FinTech startups: in the U.S., venture capitalists have been boosting their activity in the market, with Q2 FinTech investments regaining its strength, according to analysts at KPMG.

The firm’s Pulse of FinTech report for Q2 2017, released this week, found overall FinTech funding in the U.S. increased to $2 billion in the quarter, up from just $500 million in Q1. A total of 129 investment deals were completed in Q2, researchers noted.

B2B FinTech is a new focus for investors, too, KPMG analysts said, with four of the top 10 deals of the quarter landing in the B2B market, as venture capitalists and innovators look to streamline and improve corporates’ back-office functions.

“Early on, the focus of many FinTech startups was geared toward enhancing the customer experience, but now we are also seeing them turn their attention to automating mid- and back-office banking applications,” said KMPG Enterprise Innovative Startups Network Co-Leader and KPMG Venture Capital Practice Co-Lead Partner, Brian Hughes. “In addition to this shift, we also expect to see increased investment in blockchain, InsurTech and RegTech over the next few quarters.”

Analysts warned, though, that there is no guarantee this trend will continue.

“The U.S. continues to lead the way in FinTech investment, and the future looks bright — especially long-term — as the startups shift their thinking and expand their geographic reach and their core capabilities,” said KPMG’s Leader for Financial Services’ Digital and FinTech practice in the U.S., Anthony Rjeily, in a statement. “However, in the short-term, there could be caution as a result of macroeconomic issues and the expectation of rising interest rates.”

Across the globe, FinTech funding grew, too, more than doubling quarter over quarter to $8.4 billion; 293 investment deals in total closed in Q2, the report found, compared to $3.6 billion in the first quarter of this year.

Venture capital funding similarly increased, but seed and angel investments declined in Q2, researchers found. Further, while investment was strong, U.S. FinTech M&A activity “continued to be weak” during the quarter, though researchers noted this may just be part of the M&A market’s cyclical nature.

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