GP Bullhound, the European technology investment bank, charts the growth of Fintech’s leading businesses, verticals, and markets in its latest report ‘Fintech: Anything but alternative’.
The number of billion-dollar businesses consolidating the importance of Fintech to the global economy has increased to 39 and global venture capital investment into the sector has risen almost fivefold in the past three years to reach $13.6 billion in 2016.
The research is released today in Fintech: Anything but alternative. It offers detailed analysis of global investment data, as well as the companies, sectors, and regions that are driving the growth of the sector.
This analysis shows that investment in the Fintech sector has remained resilient and continued to grow in spite of wider market instability. There are now 39 Fintech companies valued at $1 billion or above globally, of which five achieved this valuation in 2016. Venture capital investment into the industry also increased by seven per cent year-on-year from 2015 to 2016.
There was also a marked shift to larger, late-stage funding rounds, such as Ant Financial’s $4.5 billion raise, as the number of companies funded fell from 942 to 840 from 2015 to 2016.
GP Bullhound identifies the factors fueling this growth as the opportunities to: cut costs and innovate in established financial services industries; and create world-class, digital-first financial services infrastructure in emerging markets.
The research found these opportunities have led to two specific market conditions. First, Alternative Finance has scaled to become the dominant vertical in the industry. Second, Asia has risen to become the leading market for Fintech investment and growth.
The data provides a wider detailed examination of each of the key verticals in the Fintech sector:
- Alternative Finance: 16 billion-dollar companies
- Digital Payments: 10 billion-dollar companies
- Data & Software: 8 billion-dollar companies
- Digital Banking: 2 billion-dollar companies
- Insurtech: 2 billion-dollar companies
- Asset Management: 1 billion-dollar company
Alternative Finance is the vertical that has matured and scaled to the greatest extent. Of the 39 Fintech companies globally valued at $1 billion or above, 16 are Alternative Finance businesses and five reached this valuation in 2016.
The strength and size of this market is expected to continue to grow. The value of global marketplace lending, a key component of Alternative Finance, is projected to reach $286.3 billion by 2020.
The research also provides a comprehensive analysis of investment and growth in Fintech by region, in USA, Asia and Europe.
For the first time, China has overtaken the US and Europe as the country producing billion-dollar Fintech companies at the fastest rate. The combined value of China’s Fintech billion-dollar companies is $112.3bn, more than double that of the US ($52.6bn). Four new Chinese entrants made the global Fintech league table in the last 12 months, compared to only one from the US.
A $4.5bn fundraise by Ant Financial in China spearheaded a shift in power from the US to Asia in the global Fintech economy. The combined value of Asian Fintech billion-dollar companies has reached $189bn, a 266 per cent increase since 2014 – a rate of acceleration the US and Europe has struggled to match.
Asian Fintech companies also have the highest valuation of any region globally at $7.8 billion. This is 2x greater than the respective figure for Europe – $3.9 billion – and 2.8x greater than the USA at $2.8 billion.
Claudio Alvarez, Director at GP Bullhound, commented: “This research shows that Fintech has consolidated its position as an influential force in the global financial services industry. It has attracted substantial investment, created significant efficiencies for incumbent institutions, and redefined consumers’ experiences of financial services.
Carl Wessberg, Director at GP Bullhound, commented: “We set out with this research to highlight the entrepreneurs, verticals, and markets that are driving the growth of Fintech. It has demonstrated that the industry has matured and scaled to such an extent as to become embedded in the foundations of the financial services sector.”
It also features expert commentary on the growth and future prospects of the sector from the following high profile entrepreneurs:
- Rishi Khosla, Co-founder and CEO, OakNorth Bank
- Christian Faes, Co-founder and CEO, LendInvest
- Jacob de Geer, Co-founder and CEO, iZettle
- David Fock, Chief Product Officer, Klarna
- Oscar Berglund, CEO, Trustly
In its research, GP Bullhound included financial technology companies with a bias towards internet and software-driven business models, companies with an equity valuation of $1 billion or above in the public or private markets, and companies which were founded, or went public, in 2000 or later.