China surpassed the U.S. in financial technology (fintech) investment for the first time in 2016, according to Accenture’s analysis of data from CB Insights, the authoriative global venture-finance data and analytics firm.
Fintech financing in Asia-Pacific doubled to $11.2 billion from $5.2 billion in 2015 while fintech investment in the U.S. was $9.2 billion and in Europe it was $2.4 billion. Global investment in fintech was $23.2 billion.
The growth in total value of fintech investments was due mainly to a few very large investments in China and Hong Kong, where just 3 percent of the deals accounted for nearly 43 percent of total fintech investment globally. The two accounted for 91 percent of all the fintech deals in Asia-Pacific.
Ant Financial Services Group — the financial-services affiliate of e-commerce giant Alibaba Group that operates China’s online-payments platform Alipay, led the deal making when it closed a $4.5 billion fundraising round in April. Lufax, backed by Ping An, the Chinese insurance company, completed a US$1.2 billion round of fundraising in January and has started using the name Lu.com.
In that same month, China’s second largest e-commerce company, JD.com, raised US$1 billion in new funding for its consumer finance subsidiary, JD Finance.
“Over the last five years, global fintech financing activity has grown by 56 percent per annum,” said Richard Lumb, group chief executive for financial services at Accenture. “For many years Silicon Valley, New York and London were the dominant centers of innovation and demand, but now fintech has spread like wildfire around the world, and Asia-Pacific has become the rising star.”
Albert Chan, Accenture’s managing director for financial services in China, said some Chinese financial services firms are taking a proactive defense.
“Well aware that they’re facing disruption from outside the industry, many of China’s financial services companies are making investments in fintech companies and exploring cutting-edge solutions such as blockchain technology. The result is robust competition in payments and lending from non-traditional players and established financial institutions working collaboratively with startups to explore fintech solutions in other parts of the business,” he said.
“Alibaba and JD.com were two major fintech investors this year, as they focus on providing their customers with end-to-end services including payments and lending.”
Fintech deals in North America and Europe were more numerous, but smaller, Accenture concluded.
According to tracking data from CB Insights, the number of fintech deals outside Asia-Pacific in 2016 increased 48 percent, but the reported amount of dollars invested fell 24 percent.
Lumb said the fintech industry in the west will remain under pressure from political uncertainty, high valuations and pressure tests on their business models.
“The winners will be those who understand how to tailor their innovations and compress their time-to-market and are able to leverage traditional financial institutions to their advantage.”
This year look to be another big year in Chinese deal-making. Ant Financial acquired Texas-based Moneygram in January and in February invested $200 million in Kakao Pay, a mobile finance subsidiary coming from South Korean m-commerce platform Kakao. In February Reuters reported Ant Financial was looking to raise about $3 billion in debt to fund more acquisitions.
Another significant player is Hong Kong Credit China Fintech Holdings which has raised $554 million for Asian acquisitions outside China. It started the year with a $30 million investment in San Francisco-based BitFury Group which offers hardware and software for blockchain and bitcoin development.