On their biannual global analysis of investment in Fintech, KPMG highlights key activities and trends within the fintech market globally and in key regions around the world. In Europe (€26B across 198 deals), the year 2018 started with a bang for the fintech market with overall investment across venture capital (VC), private equity (PE) and mergers and acquisitions (M&A) deals at mid-year, already well above 2017´s total investment results.
Germany fintech hubs expanding reach
Fintech investment in Germany remained strong in the first half of 2018, with significant raises by N26 ($160 million) and Solaris Bank ($70 million). The strength of Germany’s fintech market is becoming more globally recognized, drawing in large international investors. According to Sven Korschinowski (Partner, KPMG Financial Services) “European challenger banks are becoming very exciting to investors. N26 here in Germany and Revolut in the UK are outpacing themselves in terms of clients they have — driving further attention and interest not only from European VCs but from global investors like Chinese technology giant Tencent. This interest highlights the potential investors see in the market. Many global investors see digital banks as an entry point into the European market.”
While Berlin continued to be Germany’s most prominent fintech hub, Hamburg and Frankfurt have also worked to develop innovation hubs.
Banking corporates in Europe increasing focus on developing VC funds
Over the past 12 months, there has been a significant increase in the emergence of new corporate VC funds in Europe, with a number of banks setting up funds in order to make fintech investments.
VC fundraising activities have occurred across Europe, from Unicredit in Italy to DNB in Norway. Corporate VC (CVC) funding was quite diverse over the past 6 months, although AI remained high on the priority list, along with regtech.
Investment in regtech on the rise in Europe
Europe has been a hotbed of new regulations over the past 6 months. Given the implementation of PSD2 (Directive of the European Parliament on payment services) and the UK’s synonymous open-banking regulation and GDPR, it is no surprise that there has been a surge in regtech activity as European-based companies and companies doing business in Europe look for efficient ways to manage their compliance obligations and open-banking requirements. Within Europe, the UK continued to be the main hub for regtech innovation, with two major deals in the first half of 2018: a $25 million Series C raise by CloudPay solutions and a $10 million raise by CloudMargin. While regtech is still a relatively immature subsector of fintech, as evidenced by the relatively small deal sizes, it is evolving rapidly in terms of scope. Lexemo LLC , a research tool for Capital Requirements Regulation (CRR) from Frankfurt, is a good example of that.
Blockchain becoming EU priority
Over the past couple of years, there has been significant investment in blockchain investments across the EU. In April, 22 EU member countries signed a Declaration on the Creation of a European Blockchain Partnership in order to foster collaboration across various blockchain initiatives and to help reduce barriers to potential cross-border blockchain solutions. Initiatives such as Frankfurt´s Micobo workshop on Blockchain, DLT, and Corda architecture, represent how the ecosystem is recognizing the applicability of technologies like blockchain to improve processes.
TechQuartier -German Fintech Hub in Frankfurt within the Digital Hub Initiative run by the Federal Ministry for Economic Affairs and Energy (de:hub) – invites you to participate in our weekly events and acceleration programs, but most importantly to share experiences of Frankfurt ecosystem, ideas and to expand your network with like minded entrepreneurs.