Venture funding in the U.S. fintech sector jumped 72% in 2015, hitting a record $7.39 billion - up dramatically from $4.3 billion in 2014. The banner year was highlighted by newly minted Unicorns and increased involvement by financial services giants, but Q4’15 saw investment to venture (VC)-backed fintech companies cool off, according to the Pulse of Fintech, the quarterly global report on fintech VC trends published jointly by KPMG International and CB Insights.
“The millennial generation is at the forefront of many of the changes that are occurring,” said Brian Hughes, National Co-Lead Partner, KPMG LLP’s Venture Capital Practice. “They have grown up with the internet, are more tech savvy than previous generations and like to do everything on-demand from their smart phones. These characteristics are driving a lot of disruption across all industries, especially fintech.”
According to the new report, actual deal volume rose by only 15 deals year over year, suggesting a significant increase in deal size. In fact, the 10 largest fintech rounds of 2015 in North America, including SoFi, Zenefits, Avant and others, totaled more than $3.3B, accounting for more than 44% of funding. This likely reflects growing interest in more established entrepreneurs and business models with the ability to move to market quickly.
The report also found that corporates, including significant activity by major banks, have participated in 20%+ of all North American fintech deals in 4 of the past 5 quarters.
“Over the past year, there has been a shift as banks have moved from seeing fintech companies as disruptors to cocreators,” said Hughes. “Banks are increasingly collaborating with fintechs to embed new services and technologies that improve customer experience and drive efficiency.”
“The banking industry is experiencing a permanent shift. ATM cards, teller windows, and cash today are increasingly less relevant. Now, every major bank has a digital strategy to take their products and services mobile,” said Fiona Grandi, National Leader for Fintech, KPMG LLP. “While funding slowed in the fourth quarter of 2015, the pace of change and response in the market has accelerated and will continue to do so.”
Read the full report - The Pulse of Fintech, 2015 in Review.