Investment in Fintech companies has reached an all-time high with $8.2 billion invested in the second quarter of 2016, double the more than four billion invested in Q1 2016.
Asia and, in particular, China, significantly lead, with $7.22 billion invested in Chinese Fintechs during 2016. In total, almost $23 billion has been invested worldwide over a yearly period, more than double the funding raised during the same period last year.
In the latest sign that Fintech has far surpassed the tipping point in China and is now mainstream or on the verge of being mainstream, Ant Financial, an affiliate of Alibaba, China’s Amazon, broke all records by raising $4.5 billion in April 2016. Their app, Alipay, manages “58% of all online transactions happening in China,” according to a new report.
Lufax, an associate of the Ping An holdings group, one of China’s financial conglomerate, raised $1.2 billion in January this year for its wealth management and financial advisory services. JD Finance, a subsidiary of JD.com, a competitor to Alibaba, raised $1 billion for its electronic payment services, finance solutions, and wealth management products. In combination, the trio completes China’s domination of the scoreboard, raising almost half of all Fintech funding during the first half of 2016.
North America had almost $2 billion invested so far with Europe near another billion while South America lags far behind with just under $200 million. In combination, these four regions have raised more than $10 billion out of $13.31 billion raised worldwide in the first half of 2016.
Notable blockchain companies raised around $200 million according to the report, a 45 percent increase over the second half of 2015, but still below the $280 million investment during the first half of 2015. Overall, investment in blockchain companies has exceeded $1 billion worldwide and is “expected to increase four-fold by 2019, growing at a CAGR of 250 per cent.” For the first time, more than one blockchain company makes it to top financing with Digital Asset Holding, Circle, and Blockstream making it to the top 30 Fintech deals of the first half of 2016.
From the data, we can clearly see that China is rising as the biggest Fintech market with most payments now facilitated by Fintech firms due to China’s underdeveloped banking sector. According to the report, China’s millennial generation is playing a key role:
The combination of higher spending power and a freer adoption of technology means that fintech has an entire market of willing and able customers. China has 380M people shopping online via phones, nearly 200M people using their phones as a wallet for in-store payments.
Most of the developing countries by and large lack day-to-day financial services to the point where one can say the banking sector is as good as non-existent. Many, therefore, are suggesting that like the invention of cell phones, the development of the Internet and blockchain technology will likely allow developing countries to bypass the banking sector and leapfrog their economies. China, benefiting from a strong rule of law, has taken advantage of the opportunity, unleashing new creativity, leading to the mega deals we are witnessing.
Blockchain technology, in particular, may play a key role, but a seemingly heavy-handed approach from the Chinese government during 2014 has delayed progress, with China very much a follower at this stage. That, however, seems to have changed during 2016 with a raft of new announcements indicating all or almost all of China’s big players are now experimenting with blockchain tech – including Ant Financial and Ping An.
Asia has the potential to gain from blockchain tech being used because of its unique social structure. The Asian remittances market is particularly interesting due to a large number of popular local messengers, unbanked clients, and high penetration of smartphones.
The world is to descend on China next month for one of the biggest blockchain events of the year. The week-long gathering combines Devcon2 – a development heavy event where some of the brightest minds in this space are to showcase the year’s achievements and highlight the path forward – a Demo Day – where some fascinating projects are expected to be released – and the Global Blockchain Summit where world business leaders from Microsoft, UBS, Santander E&Y and others as well as leading developers in the blockchain space present on blockchain opportunities and, perhaps, current implementations.
It is China's opportunity to showcase what seems to be so far an amazing achievement in the Fintech space as the world gathers for what may be an historical event where three of the most disrupting trends - Fintech, blockchains, and IoT - interconnect.
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