Venture Capital (VC) funding in the fintech sector in India has seen a surge in the first quarter of 2017 led by payments and lending with an increased interest in artificial intelligence (AI), according to a latest report by KPMG. Paytm attracted Asia’s largest VC funding round of $200 million. On the blockchain front, a number of banks formed consortia with fintech companies to develop blockchain proof of concepts and interest in blockchain seems to have increased in the insurance sector.
However, India saw a steep, temporary decline in overall fintech volume. The report points out that it may be due to the uncertainty caused by demonetisation, but cyclicality of investments may also have been a key factor.
“While payments and lending continue to drive most fintech investment in India, other areas are quickly gaining momentum. AI and blockchain are receiving a lot of attention, while insurtech is poised to come into its own over the next few quarters. The government is expected to release regulations for fintech, particularly related to peer-to-peer lending, which could lead to additional activity,” Neha Punater, Head of Fintech, KPMG in India said.
The investment in the Indian fintech space must be seen in context of the global fintech investment scenario which got off with a soft start in Q1’17, with the total investment at $3.2 billion, down from $4.15 billion in Q4’16 according to the latest edition of “Pulse of Fintech”, KPMG’s international’s quarterly report on fintech investment.
Fintech M&A dropped in Q1’17, with $920 million in deal volume – down from $1.8 billion in the previous quarter, and less than half of the $4 billion in funding in Q1’16. Venture capital funding to fintechs held relatively steady at $2.3 billion.
Total fintech funding in Asia dropped in Q1’17 to $492 million invested across 32 deals, reflecting a major drop off of investment in China in addition to a dearth of $100m+ megarounds. Venture capital funding dropped from $690 million in Q4’16 to just $406 million in Q1’17. Corporates remained more resilient, with participation in Asia-based fintech deals climbing to over 30 per cent.