Demonetisation Will Save Indian Fintech Companies From Funding Blues: KPMG
Indian fintech companies are set to grow in the payments and lending space, KPMG said.
Fintech companies around the world may have experienced some slowdown in 2016, reflecting uncertainties in the broader investment market, but their growth potential remains healthy, said KPMG in a report published on Wednesday.
Total fintech funding across the globe declined to $24.7 billion last year from $46.7 billion in 2015. However, venture capital funding to these companies rose to $13.6 billion during 2016 compared to $12.7 billion in 2015, the global consulting firm said.
This was in sharp contrast with the rest of Asia where funding received by fintech companies touched record highs. Fintech companies in Asia raised $8.6 billion in 2016 compared to $8.4 billion in the previous year, with three mega rounds of funding accounting for more than half of the total investments.
Driven by mega-financings of at least $100 million or more, Asia recorded no less than $7.1 billion invested in fintech in 2016 from venture capitalists. The number of venture funding deals remained steady between 2015 and 2016. There were 149 completed rounds in 2016 – the second-highest total of the decade.
In India, venture funding activity saw a decline in terms of investment value even as the number of deals remained steady. In 2016, India reported 58 fintech deals, marginally higher than 54 reported a year earlier. These deals amounted to investments worth $219 million, significantly less than $1,646 million reported in 2015
KPMG expects the fintech space in the country to grow following the government’s move to demonetise high-value currency notes. The government’s cashless drive led to an increase in payments and transaction volumes for both payments and mobile wallet providers.
With the demonetisation effort that started in Q4FY16 in India, there has been a big increase in the number of transactions managed by both payments companies and wallet providers. As this effort continues, we should see momentum grow for digital platforms and fintech solutions.Neha Punater, Head of Fintech, KPMG India
Noting that India appears to be a key focus for VC investors in Asia, the KPMG report said that technologies like data analytics, payments and lending, and blockchain will be the ones driving interest and growth.
Corporate interest in fintech is also expected to increase in India over the next year. Already, many of India’s banks and insurance companies have created innovation funds to invest in fintechs or set aside funds for collaboration, the report said, adding that there could be interest in digital currencies like bitcoin in the future.
“Especially as India continues to push its digital currency initiatives, there are plenty of opportunities for novel product development within the space, as a number of entrepreneurs look to utilize blockchain protocols or present better use cases for consumers looking to gain exposure to bitcoin,” the report concluded.