China’s Fintech Industry Attracted Over Half of 2016 VC Investments
The fintech industry in China continues to attract significant amounts of foreign investment. Particularly the year 2016 has been quite positive for fintech in China, as the region dominated VC spending. That is anything but a surprising development, though, as other regions around the world saw their VC investment numbers dwindle as 2016 trucked on. China remains one of the biggest markets for any financial product or service, and it is also home to a lot of innovative ideas.
Chinese Fintech Continues To Appeal
During the first three quarters of 2016, Chinese fintech firms attracted over US$9bn in funding. That represents more than half of the total global fintech investments for that part of 2016. To be more precise, the significant amount of investment funds was made possible due to some mega-deals, including Ant Financial’s US$4.5bn private fund raising. China is home to quite a few mega-deals in the fintech sector, and that trend is likely to continue throughout 2017.
Although the first 9 months of 2016 have proven to be fruitful for Chinese fintech firms, the overall sentiment is rather negative. The Citi report indicates overall VC funding for 2016 will be lower compared to 2015. Investors have become far more cautious when it comes to backing fintech companies. This trend does not only affect the startup industry, though, as stock markets went through similar struggles.
When it comes to fintech investments, one has to keep a few things in mind. First of all, not every company will be successful, as the fintech startup industry is on the cusp of oversaturation. Secondly, some company valuations are far higher than the actual value the startup represents. These questionable valuations have cast a dark shadow over China’s fintech sector, although that was only to be expected.
Other regions around the world have seen their fintech VC investment numbers dwindle. North America saw a 35% decline, whereas Asia saw the numbers dwindle by nearly 75%. Despite this significant decline, Asia remains the primary fintech investment destination for now. Despite China cracking down on P2P lending, the lending industry remains the hottest fintech area for VC investments in 2016 and beyond.
The year 2017 will bring more of the same, by the look of things. It is expected IoT, insurance, big data, and even wearable devices will bring more VC investments to the fintech sector as a whole. China will remain a country to keep an eye on, though, as the expansion of overseas tourism leads to a growing demand for global financial services.
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