According to a KPMG report, investment in U.S.-based fintech companies surged to $14.2 billion across 427 deals during the first half of 2018, as investors poured money into startups in fintech emerging segments such as regtech and blockchain, as well as late stage companies.
KPMG said fintech investment in the U.S. reached a new high of over $8 billion in Q2/18, following a strong first quarter. Total investment during the first half of 2018 increased from $12.2 billion across 371 deals during the second half of 2017, and included more than 10 $100 million-plus mega rounds, including Insurtechs Oscar and Lemonade, and blockchain-based consortia company R3.
“Unlike the broader VC market, early-stage fintech companies have continued to attract a solid flow of capital in the U.S., with the several top deals in Q2 going to seed or early stage companies,” said Brian Hughes, U.S. National co-lead partner, Venture Capital Practice, KPMG. “At the same time, those able to attract later-stage funding likely reflects investor confidence in their ability to become market leaders, if they aren’t already.”
During the first half of 2018, VC investment in blockchain in the U.S. totaled $858 million, exceeding the 2017 total of $631 million.
The payments and lending sectors continued to be one of the most mature of the fintech subsectors during the first half of 2018, with most investment activity centered on late-stage companies and those companies seeking to exit.
A number of traditional U.S. banks also expanded their digital banking initiatives. JPMorgan launched a successful digital bank pilot project and plans to roll out the option nationally. Citibank also plans to create a digital-only bank, while Goldman Sachs will expand its Marcus initiative to the U.K.
More than 20 new blank check companies (a development stage company that has no specific business plan or purpose or has indicated its business plan is to engage in a merger or acquisition with an unidentified company) were created during the first half of 2018, with more than 25% noting their intent to seek out fintech opportunities. The use of blank check companies suggests investors are placing increased importance on fintech opportunities.
KPMG predicts that blockchain, regtech and insurtech will gain momentum, while AI and robotic process automation will continue to drive cross sector-opportunities. There will likely continue to be an emphasis on partnering with retailers and aggressive tech leaders globally.