KPMG Pulse of Fintech q3 17

The Pulse
of Fintech
Q3 2017
Global analysis of
investment in fintech
7 November 2017
Welcome
message
Welcome to the Q317 edition of KPMGs Pulse of Fintech a KPMG is a global network of
quarterly report highlighting the key trends and issues facing the professional firms providing
fintech market globally and in key regions around the world. Audit, Tax and Advisory services.
Fintech investment remained strong for the quarter, with investor We operate in 152 countries and
sentiment around fintech positive across the Americas, Asia have 189,000 people working in
and Europe. member firms around the world.
The independent member firms
A number of $100 million+ megadeals drove fintech investment of the KPMG network are
globally during Q317. While many of the largest deals occurred in affiliated with KPMG International
the United States (e.g. Intacct $850 million, CardConnect Cooperative (KPMG
$750 million, Xactly $564 million, etc.), companies in China, International), a Swiss entity.
Germany and Canada were also among the top 10 global deals Each KPMG firm is a legally
this quarter. distinct and separate entity and
describes itself as such.
Insurtech is expected to see record levels of funding by the end of
2017, while blockchain technologies continue to see a significant
amount of buzz. With some indications that production-capable
blockchain solutions may be closer than envisioned even from
the start of the year financial institutions are increasingly working
to understand and leverage potential technologies. Artificial Jonathan Lavender
intelligence (AI), robo advisory and regtech remained hot in more Global Chairman,
mature fintech markets, while mobile banking services spurred KPMG Enterprise,
investment in less developed jurisdictions. KPMG International
Looking ahead, the fintech sector is expected to continue to evolve Ian Pollari
rapidly with many companies, including both mature fintechs and Global Co-Leader of Fintech,
large e-commerce players, looking to diversify into adjacent KPMG International and
services. The imminent implementation of PSD2 in Europe and new Partner,
regulatory guidance in Asia could also drive additional activity. KPMG Australia
We examine these trends and other issues in this quarters Murray Raisbeck
report, in addition to discussing a number of key questions Global Co-Leader of Fintech,
driving investment and investor interest in the fintech market KPMG International and
today, including: Partner,
KPMG in the UK
What will the next evolution of the fintech market look like?
Are Asia-based fintech hubs set to become the base for Brian Hughes
fintechs future? Co-Leader,
Is blockchain truly on the cusp of becoming production-capable? KPMG Enterprise Innovative
Will regtech be the focus of the next big investment wave? Startups Network, Partner,
KPMG in the US
We hope you find the Q317 edition of the Pulse of Fintech
informative and insightful. If you would like to discuss any of the Arik Speier
information contained in this report in more detail, contact a KPMG Co-Leader,
advisor in your area. KPMG Enterprise Innovative
Startups Network, Partner,
KPMG in Israel
2017 KPMG International Cooperative (KPMG International). KPMG International provides no client
services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. #FINTECH 2
Contents
Global

Overall fintech investment remains strong
Total venture capital investment rises deal volume drops
4
Global M&A deal value drops
Median angel/seed valuations inch upward to $1.4 million
Insurtech venture capital poised to surpass 2016 totals
Americas

Total investment drops slightly from Q2
PE investment rises well beyond 2016 totals
25
M&A poised to surpass 2016 totals
Corporate participation pulls back slightly
US

Total dollars invested rises to 7 quarter high
VC investment remains solid deal volume down
35
Median angel and seed venture financing size rises dramatically over 2016
First time venture capital invested remains robust
Venture-backed exit dollars surpass 2016 annual totals
Europe

Total investment slips from Q2
Venture capital investment rebounds as deal volume plummets
48
M&A deal value and volume equals 2016 numbers
2017 (YTD) late-stage median venture financing size rises sharply over 2016
Corporate venture capital participation hits new high
Venture capital in France booms to new high
Asia

Total deal value strengthens over Q2
Venture capital investment increases as angel/seed deal volume plummets
64
Corporate venture capital participation rate hits 22% (YTD)
Indian venture investment falls on sharp decline in deal volume
In Q317, global
investment in fintech
companies hit
$8.2B
across
274 deals
Global investment in fintech stays strong even
as volume diminishes
Worldwide, investment activity in fintech remains at an elevated rate, despite dipping by count quarter over
quarter. More importantly, total deal value remained quite robust, registering $8.2 billion in aggregate even as
transaction volume diminished.
Aggregate VC investment stays robust
Even though the number of completed fintech enterprise venture financings dropped considerably primarily driven by
a decline in the amount of angel and seed funding rounds the total capital invested in Q317 grew slightly over the
level recorded in Q217 to reach $3.3 billion. The third quarter was the fifth-highest on record for VC investment in fintech
companies. The elevated level of early and late-stage VC activity speaks to ongoing venture firm interest in funding
nascent startups, as well as the importance of exposure to larger fintech companies.
Despite a dip in Q3, role of corporate VCs remains significant
Corporate participation in all VC deals globally continues to contribute to overall transaction volume as well as
support aggregate capital invested. Fintech is hardly an exception despite quarterly fluctuations, the overall
yearly figure for the proportion of VC activity with corporate participation stands at 18.4%, well over the 2016 tally
of 16%. It should be noted that given the scope and size of the fintech space, associated deal value is down
relative to 2015 and 2016, given the reduced incidence of mega-financings.
Fewer mega-deals in 2017 to date, large financings still occurring
One of the intriguing trends underlined in 2017 to date is the extent to which large venture financing rounds can
still prop up overall deal value, even dwarfing the amount of M&A transaction value in some jurisdictions. That is
more a testament to how separate fintech ecosystems are still evolving and maturing around the world, with some
frankly more advanced than others in terms of diversity, while others are growing much more quickly in key
arenas, such as how London is seeing significant fundings of fintech cybersecurity startups, while Beijing hosts
consumer-focused businesses raking in hundreds of millions of dollars in financings.
Late-stage valuations remain low relative to prior highs as industry matures
The global median pre-money VC valuation at the late stage remains below the highs of the prior three years, but
at $100 million, is hardly unimpressive. This trend has been driven more by the maturation of the industry in
general, plus the increase in overall VC activity; as more rounds have occurred, the median necessarily comes
down, unskewed by a smaller population of mega-financings. What is interesting to note, however, is that early-
stage and even angel and seed pre-money valuations have been steadily creeping up for some time as well,
cresting at new highs in 2017 to date. Partially owing to the fact so much dry powder is available for VC firms to
deploy, the fact the fintech space alone is seeing this increase testifies to investors willingness to deploy
considerable sums within key fintech segments such as security, consumer finance and more.
US angel and seed financings enter plateau
Following a quarter with significantly high sums of VC invested, it was only typical of mean reversion for the US to
record a decline in total deal value. That said, it does appear that by now angel and seed funding volume has
entered a plateau after declining for several quarters. This aligns with the overall trend of much of the lower-
hanging fruit in fintech in developed markets having already been snatched by currently fast-growing, much larger
enterprises such as Oscar for health insurance, MetroMile for novel auto insurance applications and more.
Accordingly, angel and seed financiers dialed down their investing activity and now are recording a more
historically reasonable volume by pursuing more emergent niches of fintech.
Fintech investment in Europe remains substantial
After steady growth since plummeting in the back half of 2016, overall fintech deal value in Europe remains quite
high. It is important to recall that overall fintech transactions will be significantly skewed in Europe on a quarterly
basis, as indeed global figures are, simply due to how the fintech industry has evolved over the years. Currently,
the European fintech scene is still maturing, driven by advances in key metropolitan hotbeds of innovation as well
as increased policymakers engagement.
All currency amounts are in USD, unless otherwise specified, data provided by PitchBook.
Global investment on a more sustainable
trajectory
Total global fintech investment experienced a modest drop in Q317 following a significant rise in total
investment during Q217. This decline is more reflective of the cyclical nature of the deal environment
and is not expected to be an ongoing trend heading into Q417 and 2018. Despite a significant drop in
the number of fintech deals globally, reflective of trends seen in the broader investment environment,
investor interest in fintech remained very positive.
On the venture capital (VC) front, investment in fintech continued to rise steadily marking the fourth
straight quarter of investment growth. Meanwhile, the total number of fintech-related deals declined
across every deal stage, with the decline in angel and seed deals most pronounced. This trend was not
limited to fintech deals specifically, but rather reflects activity across the VC market.
Large deals propel fintech market globally

A significant number of large deals drove fintech investment in Q317. Companies in the United States
accounted for more than half of Q317s biggest deals, with Intacct ($850 million), CardConnect
($750 million), Xactly ($564 million), Merchants Choice Payments solutions ($470 million), Access Point
Financial ($350M) and Service Finance Company ($304 million) among the top 10 global deals this
quarter. Companies from four different jurisdictions rounded out the top deals, including Germany-based
Concardis, UK-based Prodigy Finance, Canada-based TIO Networks, and China-based Dianrong.
Median deal size of early-stage deals grows

The median deal size of VC investments in fintech remained high relative to previous years. At the end
of the third quarter, year-to-date median deal size for angel and seed stage deals was $1.4 million
compared to $1 million in 2016, while the median deal size of early stage deals rose from $5.1 million
to $5.5 million over the same timeframe. For later-stage deals, the median deal size held steady at
$16 million.
The increase in investment for seed and angel deals suggests that investor knowledge and
understanding related to fintech is growing, particularly around more mature areas of fintech such as
payments and lending. As a result, investors are making bigger bets on fintech than they have
historically. The number of deals involving companies looking to implement fintech proven in one
jurisdiction in other markets has also increased. These types of investments are quite compelling to
investors as they are considered to be somewhat lower risk compared to other potential investments.
Insurtech is on course for record year of VC investment

Insurtech activity continued to rise this quarter. Both the total VC investment in insurtech and the number
of insurtech VC deals are on pace to exceed 2016 results by the end of the year and potentially exceed
previous highs. As of the end of Q317, VC investment in insurtech sat at $1.53 billion across 179 deals,
compared to $1.79 billion across 203 deals in all of 2016.
Insurtech is still considered a relatively new phenomenon when compared with banking and other areas
of financial services, but it is rapidly catching up. In Q217, UK-based insurtech startup Gryphon raised
180 million in the biggest insurtech deal of the region by far. During Q317, Chinas first online insurer
Zhong An held the Worlds first major insurtech IPO in Hong Kong, raising $1.5 billion on a valuation of
$10 billion. These financings are raising investor confidence worldwide in insurtechs growth potential
going forward.
trajectory (contd)
Looking to the future, AI, the Internet of Things (IoT), robotics, and blockchain are all expected to be hot areas
of insurtech investment. Corporate participation in fintech deals is also expected to rise in the insurtech space
compared to other areas of financial services. This is because traditional VCs see the insurance ecosystem as
complex and therefore like to include corporates with more understanding of the industry in their investments.
Blockchain evolves beyond finite test cases

Over the past several quarters, blockchain development has evolved rapidly, moving out of the experimental
phase and becoming more focused on developing robust prototypes. There are also some indications that a
number of companies are in the process of developing production blockchain systems. While there continues
to be strong direct investment in blockchain, financial institutions are also investing heavily internally and are
actively participating in blockchain syndicates and consortia.
Globally, the banking consortia R3 continues to be the largest of its kind. While R3 initially was quite varied in
its development efforts, it has increasingly focused on specific areas of blockchain, including derivatives
trading, payments, and trade settlements. R3s evolution highlights both the maturation of R3 as a consortium
and the growing recognition that blockchain development needs to be well-attuned in order to ensure ongoing
development progress and, hopefully, rapid commercialization.
While less mature than its banking counterpart, B3i the insurance industrys largest blockchain syndicate
is growing rapidly, adding participants every quarter. While R3 and B3i may be the most prominent, there are
also a growing number of smaller syndicates focused on blockchain solutions, many of which are focused on
financial services. On a global level, numerous governments are supporting blockchain development and the
creation of blockchain hubs. Singapore in particular is leading the way, but there is also interesting activity in
the UAE and Kazakhstan. Other countries have also taken action on the blockchain front, with Spain recently
introducing a new cross-industry blockchain consortia aimed at developing the countrys blockchain
ecosystem.
The rising tide of ICOs

Recently, there has been an explosion in interest in Initial Coin Offerings (ICOs) as an alternative means of
raising funding particularly for blockchain-based companies. Funding raised through ICOs rose
exponentially over a 4-month period earlier in 2017 from $103 million in April to $574 million in July.1 With
the rapid rise of ICOs, however, has come an increasing focus from regulators. In China, ICOs have been
banned entirely, while regulators in other countries have increased their scrutiny over such activities. A
number of jurisdictions are expected to put the brakes on ICOs until they are able to gather a greater
understanding of the risks and opportunities and, therefore, provide a more coherent regulatory response. At
the same time, a number of smaller jurisdictions like Malta, Mauritius, Switzerland, and Gibraltar have set their
sights on becoming leaders in ICO-related innovation.
Mature fintechs become laser-focused on extending customer value

Historically, many fintech companies have been successful by focusing on improving a single area of the
customer experience (e.g. payments, lending). Over the last few quarters, however, more mature fintechs, in
addition to large e-commerce companies and technology players,have started to expand their service offerings
into adjacent areas to extend their reach and provide more customer value. For example, in Q317, PayPal
and Mastercard extended their partnership within Asia to increase PayPals point of sale presence, while also
providing opportunities for customers and small businesses to cash out funds to a Mastercard debit card.2
1 https://www.forbes.com/sites/chancebarnett/2017/09/23/inside-the-meteoric-rise-of-icos/#31b70e805670
2 http://www.mastercard.com/press-releases/mastercard-and-paypal-expand-partnership-in-asia-pacific-to-spur-mobile-and-digital-commerce
trajectory (contd)
Retail banking continues to evolve
Despite the complexity of the retail banking sector, it has continued to evolve at a steady pace in recent
quarters. Recently, a growing number of fintechs have applied for or obtained banking licenses, such as
Square in the US and Klarna in Sweden. Over the past few quarters, there has also been growth in
challenger bank offerings, particularly in Brazil and Malaysia. While there are over 100 challenger banks
globally to date, most have focused on niche products rather than the entire value chain of retail
banking. While there are some efficient niche players, there will likely be some consolidation in the future
in order to create better scale and enhance the ability to compete.
Some traditional banks are also expanding into digital banking, introducing nimble, standalone digital
banks that operate independently and do not rely on their existing legacy systems. For example, Bank
Leumi in Israel has introduced Pepper, Santander Group in Spain has launched Openbank, and
Singapore DBS has introduced Digibank in India.
Regulators globally have also increased their focus on digital banking and on finding ways to encourage
innovation and competition. For example, the Australian financial regulator is currently hosting
consultations related to the introduction of a restricted license to make it easier for fintechs to do
business.
Expanding number of fintech hubs

The growing breadth of fintech activities globally has led to the evolution of numerous distinct fintech
hubs. While traditional hubs like the US, the UK, and Israel continue to dominate, other jurisdictions are
working to become leaders in unique sub-sectors of fintech. For example, Japan is becoming a leader in
fostering engagement around robotics process automation (RPA), while Taiwan is growing as a
blockchain center, and Malaysia is defining itself as a hub for cybersecurity innovation.
Trends to watch for globally

Globally, fintech is expected to continue to grow and diversify over the next few quarters. Artificial
intelligence, insurtech, regtech, and blockchain are poised to remain hot areas of finvestment. The
rapidly approaching implementation deadline for PSD2 in Europe, and consideration for similar regimes
in other markets, including Australia, is expected to put an increased focus on open banking.
Over time, the importance of Asia-based fintech hubs, such as Singapores insurtech innovation hub, is
also expected to grow, particularly in the eyes of traditional corporates. As a result, it would not be
surprising to see more companies from North America making investments in the region in order to gain
more visibility and access to such innovations.
A quarterly dip cant offset overall momentum
Global investment activity (VC, PE and M&A) in fintech companies
2010 Q3'17
$30.0 450
400
$25.0
350
$20.0 300
250
$15.0
200
$10.0 150
100
$5.0
50
$0.0 0
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q
2010 2011 2012 2013 2014 2015 2016 2017
Deal Value ($B) # of Deals Closed
Source: Pulse of Fintech Q3'17, Global Analysis of Investment in Fintech, KPMG International (data provided by PitchBook) November 7, 2017.
Note: refer to the Methodology section on page 81 to understand any possible data discrepancies between this edition and previous editions of The Pulse of
Fintech. Please note that the separate PE and M&A data sets both include PE buyouts as a transaction type per the Methodology section on page 81.
There is still variability in overall fintech investment activity on a quarterly basis, which is only to be expected given
that multiple segments of the space are still relatively nascent. That said, aggregate activity and deal value remain
at an elevated level relative to the period prior to late 2013, suggesting that investors and acquirers interest in
fintech has entered a new normal of significant transactional volume.
Fintech continues to rapidly evolve on a global level with an increasing diversity of funding participation
and sources, geographic spread and areas of interest. We are seeing the emergence of fintech leaders in
specific jurisdictions looking to scale their platforms internationally, while technology giants move into
adjacencies. This is a trend that is expected to continue and will represent a growing concern for
incumbent financial institutions, forcing many to take bolder steps in response.
Ian Pollari
Global Co-Leader of Fintech, KPMG International and Partner and National Sector Leader, Banking
KPMG Australia
A slide in angel and seed volume takes a toll
Global VC activity in fintech
2010 Q3'17
$8.0 350
$7.0 300
$6.0
250
$5.0
200
$4.0
150
$3.0
100
$2.0
$1.0 50
$0.0 0
2010 2011 2012 2013 2014 2015 2016 2017
Capital Invested ($B) # of Deals Closed Angel/Seed Early VC Later VC
Source: Pulse of Fintech Q3'17, Global Analysis of Investment in Fintech, KPMG International (data provided by PitchBook) Nov ember 7, 2017.
Resembling general venture trends, a significant downturn at the earliest stage angel and seed led to a
major decline in the tally of completed venture financings in Q317. Yet as VC invested remained quite
healthy, it is clear investors are still quite interested in funding emerging segments of fintech overall, even if
market leaders in certain areas, such as insurtech or payments technology, are increasingly dominating
later-stage fundraising.
Activity remains healthy as deal value dips
Global PE activity in fintech
2010 Q3'17
$12 50
45
$10
40
35
$8
30
$6 25
20
$4
15
10
$2
$0 0
2010 2011 2012 2013 2014 2015 2016 2017
Deal value ($B) # of deals closed
As PE dealmakers grapple with a complex and challenging environment for finding new targets, their interest
in the tech sector remains high. (A decline in deal value quarter-over-quarter was offset by sustained
transaction volumes, highlighting PE interest in fintech-related opportunities.)
M&A remains within historical range
Global M&A activity in fintech
2010 Q3'17
$25 120
Deal value ($B)

100
$20
# of deals closed
80
$15
60
$10
40
$5
20
$0 0
2010 2011 2012 2013 2014 2015 2016 2017
All in all, M&A volume still remains at an elevated level, especially compared to the years prior to 2014.
Moreover, the tally of deal value is still relatively robust, hovering around the historical midrange of the
decade thus far. Its clear that since only a handful of fintech subsectors have evolved far enough in their
innovation cycles to generate significant amounts of M&A, investment activity in other key fintech
segments remains largely dominated by venture capitalists.
Early-stage valuations inch upward
Global median venture financing size ($M) by stage in fintech
2010 Q3'17
Angel/Seed Early VC Later Stage VC
$20.5
$16.0 $16.0
$13.8
$10.0
$8.3 $8.3
$7.0
$5.1 $5.5
$4.9
$4.3
$2.9 $3.1 $2.8 $3.2
$1.0 $1.0 $1.4

$0.6 $0.6 $0.5 $0.5 $0.7
2010 2011 2012 2013 2014 2015 2016 2017 YTD

(Q3)
Global median pre-money VC valuation ($M) by stage in fintech

2012 Q3'17
$181
$130
$111
$100
$62 $63
$23 $25
$22
$14 $15
$10
$5.0 $5.4 $6.5
$3.0 $4.1
$3.7
2012 2013 2014 2015 2016 2017 YTD (Q3)
Source: Pulse of Fintech Q3'17, Global Analysis of Investment in Fintech, KPMG International (data provided by PitchBook) November 7, 2017
CVCs continue to stay highly active
Global venture activity in fintech with corporate venture participation
2010 Q3'17
18% Partially driven by the fact

the overall volume of
financings has declined,
16%
thus mathematically upping
15% their participation rate as a
matter of course, corporate
venture arms are still quite
12% active when it comes to
11% fintech. This can be
chalked up to multiple
9% 9%
9% multinationals looking to
remain on top of R&D by
outsourcing it to their
corporate development and
venture investing units,
hoping to gain exposure via
that method to the latest,
key, emerging fintech
innovations.
$0.1 $0.2 $0.6 $0.7 $2.3 $8.2 $9.6 $3.3
2010 2011 2012 2013 2014 2015 2016 2017
YTD
Capital Invested ($B) % of Total Deal Count (Q3)
Investors globally are becoming more mature about their investments in fintech, even as the startups
themselves mature. Moving forward, we are likely going to see investors increasingly looking for
companies to deliver value, and to demonstrate their ability to achieve results.
Jonathan Lavender
Global Chairman, KPMG Enterprise
KPMG International
Exit value resurges significantly in Q3
Global venture-backed exit activity in fintech
2010 Q3'17
$2.5 30
25
$2.0
20
$1.5
15
$1.0
10
$0.5
5
$0.0 0
2010 2011 2012 2013 2014 2015 2016 2017
Exit value ($B) Exit count
Although still overall at a subdued level given that enough mature fintech businesses have emerged to
generate a hefty amount of selling, the fintech space can still experience outlier transactions that skew
overall totals, such as the acquisition of Intacct by Sage Group in August 2017 for $850 million.
Jonathan Lavender
Global Chairman, KPMG Enterprise
KPMG International
Strategic buyers drive most value
Global venture-backed exit activity by type (#) in fintech
2010 Q3'17
70
Strategic Acquisition Buyout IPO
60
50
40
30
20
10
0
2010 2011 2012 2013 2014 2015 2016 2017 YTD
(Q3)
Global venture-backed exit activity by type ($B) in fintech

2010 Q3'17
$3.5
$3.0 Strategic Acquisition Buyout IPO
$2.5
$2.0
$1.5
$1.0
$0.5
$0.0
2010 2011 2012 2013 2014 2015 2016 2017 YTD
(Q3)
Activity remains quite strong
Global VC, PE and M&A activity in insurtech
2010 Q3'17
Deal Value ($B) # of Closed Deals
The exact delineation
between traditional insurance
businesses technology
289 operations and pure-play
insurtech companies can lead
264
to some shifting in figures as
238 238 greater clarity is achieved
quarter over quarter, but
regardless, for the space as a
192 whole it is clear that insurtech
is occupying many
152 dealmakers attention. Given
how increasing adoption of
130
digital solutions and, most
recently, artificial intelligence
98
innovations may help
transform risk, pricing and
more for traditional insurers, it
is clear that consolidation and
accompanying investment in
$3.4 $0.6 $1.1 $1.8 $8.6 $4.5 $12.2 $5.8 startups will likely continue to
2010 2011 2012 2013 2014 2015 2016 2017 YTD power insurtech activity going
(Q3) forward.
Note: this chart details overall investment (venture capital transactions, plus general M&A activity which includes private equity buyouts) in insurtech, in a
departure from a prior edition of the Pulse of Fintech, which included just venture investment in insurtech. For example, the $12.2 billion deal value total in
2016 is increased significantly by the inclusion of M&A. Please note that the separate PE and M&A data sets both include PE buyouts as a transaction type
per the Methodology section on page 81, with PE activity by itself always depicted using extrapolated deal values.
Innovation in the insurance industry is evolving at an accelerated rate as some insurance companies are
leveraging the lessons learned from other industries to leapfrog ahead.
David Milligan
Global lead, Matchi and Associate Director
KPMG in South Africa
VC invested roars past $1.5 bil ion
Global venture activity in insurtech
2012 Q3'17
203
192
179
157
115
88
$326 $368 $1,122 $1,896 $1,797 $1,533
2012 2013 2014 2015 2016 2017 YTD (Q3)
Capital Invested ($M) # of Closed Deals
Without any sign of slowing, venture investment in 2017 stormed past $1.5 billion in terms of value, looking set to
remain just as strong as in 2015 and 2016. Traditional insurance business lines are ripe for disruption via the
application of advanced analytics leveraging artificial intelligence-reliant programs, while increasing connectivity
amid devices and tools can also offer potential advances in efficient pricing and smoother customer experiences.
This quarter, we saw the worlds first major IPO of an insurtech company with Zhong Ans successful $1.5
billion IPO in Hong Kong. Between this and last quarters megadeal by Gryphon in the UK, theres little
doubt that the sector is getting fresh wind in its sails. 2018 is looking very promising for insurtech from an
investment point of view.
Murray Raisbeck
Global Co-Leader of Fintech, KPMG International and Partner, Insurance
KPMG in the UK
Wil blockchain investment be impacted by ICOs?
Global venture investment in blockchain companies
2013 Q3'17
75
52 52
27
7 $13
$94 $170 $392 $171
2013 2014 2015 2016 2017 YTD (Q3)
Capital Invested ($M) # of Closed Deals
Note: when we look at the total amount invested this year, including amounts invested into rounds that have not yet closed, the 2017 YTD figure is
significantly higher. The 2017 YTD number excludes the $107M raised by R3 as this amount only makes up the first two tranches of the funding round.
The third and final tranche is expected later this year. Once the final tranche is closed, the total amount invested in the completed round will be recognized
in our data.
With a significant increase in ICOs over the past year, the model for ICOs has begun to evolve just as
the regulators had devoted more attention and clarified the relevance of existing regulation. Specifically,
ICO initiatives even in advance of regulatory guidance are ever more focused on transparency and integrity
that addresses the needs of investors and creates a stronger foundation for confidence that will aid growth
in this new market.
Eamonn Maguire
Global Head of Digital Ledger Services, KPMG International, Managing Director
KPMG in the US
Big tech and the banking industry: threat or
opportunity?
Pressure from more than fintechs
The banking industry faces threats on multiple fronts. Recent quarters have seen not only the rise of
challenger banks in global jurisdictions, but also an increasing number of large fintechs like Square and
Klarna applying for banking charters. Yet while these growing players have made headlines, technology
and ecommerce giants like Amazon, Google, Facebook and Apple may pose greater threats to the
traditional banking model.
Customer focus driving encroachment from ecommerce giants

For ecommerce firms like Amazon and Alibaba, the focus on creating a frictionless, one-stop-shop for
digital purchases is driving their entrance into areas traditionally dominated by financial players.
Identification, verification and trust-based kite marks are increasingly on these firms radar, under the
banner of KYC. Ecommerce giants already hold and process significant volumes of customer data. By
creating their own algorithms and verification processes, these companies can achieve greater efficiency
while reducing costs compared to obtaining these services from a third-party provider. As an example,
Amazon entered the lending market with Amazon Lending in 2011. Since then, more than $3 billion has
been lent to small businesses in the US, the UK and Japan, who sell on the Amazon platform.
While Alibaba and Amazons strategies are arguably the most developed, using customer data to better
manage credit risk, working capital and liquidity, other ecommerce players are investigating similar
approaches. Though the focus is currently on creating an exemplary experience for customers within their
ecosystem, there is the potential for such services to be offered as a white label product in the future,
further disintermediating traditional players.
Data-centric businesses apply pressure on other fronts

The focus of technology giants like Google, Apple and Microsofts on developing and enabling data-centric
business models provide threats from another front. While banks hold and process significant financial
data, the speed and efficiency with which a data-centric business can achieve these same tasks is
accelerating. In the future, the front-end user interface and data processing elements of traditional banking
players may eventually yield to technology players that can deliver reliable results on a more expedient
timescale.
Facebook is an example of a non-fintech player expanding into what is currently fintech-dominated space:
digital payments. Coming from a social media background, Facebooks driver is the ability to monetize
social communities as an integrated part of their ecosystem. While Facebooks strategy is not new, the
size of its existing, engaged customer base offers opportunities unmatched by fintech or traditional
payments firms.
Partnerships offer banks opportunities for modernization

Despite the encroachment, tech giants growth into traditional financial services areas offer opportunities
for banking players. Current trends show that technologies such as AI, machine learning and cloud
computing will play increasingly critical roles in the financial services industry in coming years.
Partnerships with technology giants with a deeper and more robust understanding of these technologies
can provide significant advantages to banks and other financial services firms currently hobbled by legacy
systems, processes and people. Increased social engagement, and technologies to better manage
customer relationships in the digital sphere, offer other opportunities.
Big tech and the banking industry: threat or
opportunity? (contd)
Through partnerships, tech giants can also offer advantages such as increased speed to market,
inexpensive and scalable infrastructure, and modern data analytics capabilities, including access to proven
machine learning and cognitive technologies. These are all areas in which tech and ecommerce giants
excel, unencumbered by legacy technology.
China exhibits possible model for the future of retail banking

In developed nations, despite fintech and challenger bank innovations, consumer inertia has left traditional
players with the lions share of personal and retail transactions for now. Yet in markets such as China, a
new model is developing in which digital wallet providers aim to deliver a broad range of consumer services,
of which banking and financial services are only one part. To address this threat of future disintermediation
and continue to be viable as a customer interface, banks need to think more broadly about the services they
provide in the real economy.
Achieving this goal requires greater technological competence in accessing and managing data as an asset.
In developing markets, especially in Africa and Asia, ecommerce and telco firms have been able to
leapfrog the traditional banks to offer modern banking services on mobile platforms; however, regulation
and legacy infrastructure limits western banks abilities in this regard. Diverse partnerships that offer
competencies to engender similar services whether with tech giants, ecommerce firms, fintechs or all of
the above will become increasingly critical for banks wishing to avoid obsolescence.
Looking forward
The push of technology and ecommerce giants like Amazon, Alphabet and Facebook into financial services
is driving banks to reconsider their business models and question where they fit in the changing ecosystem.
Some are considering whether to focus on utility services, transaction banking, or acting as a source of
capital, while others are looking to become white-label platform providers of analytics, KYC and credit risk
services to other firms.
Each of these paths offers challenges and opportunities in equal measure. Yet, as pressures mount from a
myriad of sources, it becomes increasingly clear that for banks to survive, change is mandatory.
After active year, banks dial down M&A
Global M&A of technology companies with commercial banks participating
2010 Q3'17
Deal value ($B) # of completed deals
41
30
29
28
25
21
18
16
$1.5 $5.4 $2.1 $2.6 $4.6 $1.4 $14.4 $0.1
2010 2011 2012 2013 2014 2015 2016 2017 YTD

(Q3)
After a highly active 2016 in which aggregate deal value was skewed significantly by a mammoth buyout of
Qihoo 360 Technology Group by a consortium of investment firms commercial banks have adopted a much
slower pace this year, likely due to not only their relatively higher pace since 2013 but due to increasing
investment in internal operations. M&A doesnt need to replace all R&D, after all.
Just as weve seen the convergence of data, ecommerce and Telco companies to offer broad financial
services in developing markets, were witnessing ecommerce and technology giants making a similar play
in developed markets. Unencumbered by legacy infrastructure, these new players ability to manage and
gain value from customer data far outstrips that of most traditional banks.
Joe Cassidy
Partner, Financial Services Advisory
KPMG in the UK
Deal value and volume set to hold steady
Global M&A of fintech companies with financial services firms participating
2010 Q3'17
101
77 75
57 59
56
45
37
$6.2 $8.1 $3.0 $5.1 $15.1 $20.1 $7.4 $7.0
2010 2011 2012 2013 2014 2015 2016 2017 YTD

(Q3)
Deal value ($B) # of completed deals
It is important to note that on a historical basis, fintech M&A with financial services participating remains relatively
high, even if 2015 still remains a clear peak. That is not so much driven by specific sector dynamics in fintech as
the general cycling down of M&A volume over the past few years. Asset valuations remain high, which contributed
to 2017 likely exceeding aggregate deal value in 2016.
With increasing pressure from companies like Google and Amazon , as well as regulations like PSD2
designed to improve competition, banks need to think less like banking service providers and more like
business service providers as they develop new value adding services.
Anton Ruddenklau
Partner & Head of Digital & Innovation, Financial Services
KPMG in the UK
Top 10 global fintech VC, PE and M&A deals in Q3'17
9 8 2
1 3
4 5 6 7 10
1 Intacct $850M, San Jose, CA 6 Access Point Financial $350M, Atlanta

Institutional/B2B Lending
M&A Buyout
ConCardis $806M, Eschborn, Germany Service Finance Company $304M, Boca
2 7 Raton, FL
Payments/transactions
Secondary buyout Lending
M&A
CardConnect $750M, King of Prussia, 8
3 PA Prodigy Finance $240M, London
Payments/transactions Lending
Public-private M&A Series C
4 Xactly $564M, San Jose, CA 9 TIO Networks $238.9M, Vancouver
Institutional/B2B Payments/transactions
Secondary buyout M&A
5 Merchants Choice Payment Solutions 10 Dianrong $220M, Shanghai
$470M, Shenandoah, TX
Lending
Payments/transactions Series D
M&A
In Q317, fintech
investment in the
Americas hit
$5.35B
across
158 deals
Large US mega-rounds propel fintech
investment in Americas
During Q317, fintech investment in the Americas continued to be dominated by deals being conducted in
the US. Of the $5.35 billion invested across the Americas, the US accounted for over $5 billion. Outside
of the US, fintech investment in other jurisdictions within the Americas was considerably slow during
Q317, with only Canada seeing a significant level of fintech investment during the quarter. Fintech
activity in Mexico, Brazil and other jurisdictions remained very weak, although positive non-investment
activity related to fintech did occur.
Fintech investment in Americas dominated by US megadeals

Fintech investment in the Americas was strong in Q317, buoyed primarily by large megadeals in the US.
Of the top ten deals in the Americas this quarter, nine occurred in the US. Of these, three exceeded $500
million, including Intacct ($850 million), Cardconnect ($750 million), and Xactly ($564 million). The US
was also responsible for the quarters only $100 million+ VC megadeals, including Bread Operations
($126 million, Series B), Coinbase ($108 million, Series D), and Blend Labs ($100 million, Series D).
Only the July acquisition of a Canadian company cloud-based, multi-channel payments company TIO
Networks by PayPal in a deal valued at $239.5 million managed to buck the US dominance trend.
Fintech investment in Canada remains strong in Q317

Excluding the mega-buyout of DH Corp in Q217, Canadian fintech investment remained relatively steady
during Q317. Canadian banks have started to define their fintech strategies, with a number looking not
only nationally, but internationally for innovation. During Q317 for example, TD opened an office in Tel
Aviv focused on cybersecurity, while Scotiabank recently announced a partnership with NXTP Labs in
order to gain access to startups in Mexico, Columbia, Chile, and Peru that can help it drive innovation.1
Artificial intelligence and regtech remain hot areas of investment in Canada, while insurtech is poised to
see significant growth. Robo advisory is also starting to make waves in Canada with both Bank of
Montreal and RBC ramping up their robo advisory activities. The Canadian government recently delayed
its Review of the Federal Financial Sector Framework until 2019. It is expected that this review, once
completed, could drive open banking innovation similar to PSD2 in Europe.
Latin America continues to be ripe for fintech, particularly in Brazil

While fintech investment in Latin America remains limited, the region is ripe for potential opportunities
particularly related to the unbanked and underbanked. According the Latin America Venture Capital
Association, obtaining credit is incredibly difficult in the region and almost half of adults do not have a
bank account.2
Investors are slowly starting to make inroads into Latin America, with Brazil taking the majority of interest
and investment. In 2016, Brazil attracted $204 million in fintech investment, driven primarily by Nubanks
$80 million fundraising round. While 2017 fintech funding has been significantly lower, it is expected that
the region will continue to be an area of long-term focus for investors.
Mobile banking driving fintech activity in Mexico

Direct fintech investment activity in Mexico was weak in Q317. The countrys most prominent fintech
activity in Q317 was the announced acquisition of Bankaool the countrys first online bank by
traditional bank Ve Por Mas in July.
1 www.investmentexecutive.com/-/scotiabank-announces-latin-america-fintech-partnership
2 www.forbes.com/sites/mergermarket/2017/09/19/fintech-startups-attract-capital-in-latin-america//#4599fa904eeb
Large US mega-rounds propel fintech
investment in Americas (contd)
Despite the weak investment this quarter, Mexico continues to be a hub of fintech innovation particularly
in the mobile banking space, from digital wallets and aggregators to peer-to-peer and online lending.
Accelerators continue to be a main driver of fintech innovation in the region, with global financial
institutions taking active interest. In Q317, for example, HSBC and Ignia announced support for startup
bootcamp Mexico. Over time, these accelerators are likely to spur fintech investment in the region.
One of Mexicos biggest challenges with respect to attracting fintech funding revolves around the lack of
a regulatory framework for key activities. Should the country move forward with such an endeavor, the
clarity could provide a strong impetus for future investment.
Trends to watch for in the Americas

Over the next few quarters, AI, robo advisory, insurtech and regtech are expected to remain growth
areas, particularly in the US and Canada. Fintech activity in Latin America is likely to remain focused on
mobile banking, including payments and lending. The US is expected to continue to attract the lions
share of fintech investment in the Americas, followed by Canada. While investment in Latin America is
expected to remain relatively weak over the short term, the regions potential bodes well for longer-term
opportunities.
Investment slides only slightly by count
Fintech VC, PE and M&A activity in the Americas
2010 Q3'17
$20.0 250
$18.0
$16.0 200
$14.0
$12.0 150
$10.0
$8.0 100
$6.0
$4.0 50
$2.0
$0.0 0
2010 2011 2012 2013 2014 2015 2016 2017
Note: please note that the separate PE and M&A data sets both include PE buyouts as a transaction type per the Methodology se ction on
page 81.
With relatively small fluctuations, it does appear that investment activity within fintech in the Americas has by and
large steadied at a new normal. Especially as the strong tally of deal value in Q317 suggests, there is still significant
appetite on the part of dealmakers and venture firms alike to stay active within the fintech environment.
Activity steadies, by and large
Venture investment in fintech companies in the Americas
2010 Q3'17
$3.5 180
160
$3.0
140
$2.5
120
$2.0 100
$1.5 80
60
$1.0
40
$0.5
20
$0.0 0
2010 2011 2012 2013 2014 2015 2016 2017
Source: Pulse of Fintech Q3'17, Global Analysis of Investment in Fintech, KPMG International (data provided by PitchBook), November 7, 2017.
Key segments of fintech are still likely to attract venture investors dollars, primarily as there remain
significant advances to be made and consequently capitalized upon when it comes to outmoded financial
technology. Whether tackling novel forms of lending by offering platforms for peer-to-peer transactions, or
more efficiently pricing certain types of products, there are viable business opportunities aplenty. It is
interesting to note, moreover, that even angel and seed funding volume has steadied in the Americas.
2017 set to go down as a strong year
Fintech PE activity in the Americas
2010 Q3'17
70
68
55 55
50
37 36
31
$3 $5 $2 $7 $14 $7 $6 $9
2010 2011 2012 2013 2014 2015 2016 2017 YTD

(Q3)
Deal Value ($B) Deal count
Thanks in part to DH Corp.s buyout, but notwithstanding a few other hefty transactions such as Access Point
Financials purchase, 2017 is set to go down as a strong year in terms of deal value, as well as volume.
Aggregate deal value stays resilient
Fintech M&A activity in the Americas
2010 Q3'17
182
152
137
109 111
107
93
65
$2.5 $7.9 $3.2 $7.4 $11.1 $31.2 $10.1 $9.0
2010 2011 2012 2013 2014 2015 2016 2017 YTD

(Q3)
Deal value ($B) # of closed deals
When assessing historical trends of the decade thus far, it would be tempting to presume that fintech M&A is
on the downswing overall after a peak. That downturn is hardly fintech-specific, as globally the M&A cycle has
been waning. Rather, what is clearer is that even within fintech significantly high valuations and relatively
robust dealmaking will likely result in a very healthy aggregate deal value, even amid diminished volume.
Valuations have normalized, remain high
Median fintech venture financing size ($M) by stage in the Americas
2010 Q3'17
$22.0
$18.0
$16.0
$11.7
$10.6
$8.5 $8.3
$6.9 $7.0
$6.3
$5.1
$4.1 $4.0
$3.3 $3.0
$2.8
$2.0
$0.8 $1.3 $1.0
$0.6 $0.7 $0.5 $0.6
2010 2011 2012 2013 2014 2015 2016 2017 YTD

(Q3)
Median fintech venture pre-valuation ($M) by stage in the Americas

2012 Q3'17
$196
$125
$91 $95
$75
$69
$32.9
$26.7 $22.9
$13.3 $14.4 $15.6
$7.3 $6.2 $7.7
$4.5 $3.9 $4.8
2012 2013 2014 2015 2016 2017 YTD (Q3)
Corporate participation reverses
Fintech VC activity in the Americas with corporate participation
2010 Q3'17
18%
16%
14%
12%
10%
9%
9%
8%
$0.1
$0.2 $0.5 $0.5 $1.7 $3.7 $2.4 $1.8
2010 2011 2012 2013 2014 2015 2016 2017 YTD

(Q3)
Capital invested ($B) % of total deal count
Although still at an elevated level, CVCs portion of overall venture financing in 2017 year-to-date is down by
a couple percentage points from that of 2016. All in all, that is driven by the size ranges of VC activity within
fintech in general, as even one particularly slumping quarter can shift year-end trends. Accordingly, it is best
to wait for full-year results to assess whether any true shifts in CVC participation in fintech VC financing in
the Americas have occurred.
After a blockbuster quarter, a downturn
Fintech VC, PE and M&A activity in Canada
2014 Q3'17
$4,000 25
$3,500
20
$3,000
$2,500
15
$2,000
10
$1,500
$1,000
5
$500
$0 0
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q
2014 2015 2016 2017
Deal Value ($M) # of Deals Closed
page 81.
Canadian fintech activity will likely remain skewed for some time by that one mega-buyout of DH Corp. in
Q217 otherwise, Q317 figures would reside significantly within normal historical ranges, even allowing for
a significantly sized deal such as Paypals purchase of TIO Networks for C$302 million in July.
Banks in Canada are getting much more serious about fintech, looking far beyond Canada for the
technologies and companies able to help them achieve their desired objectives. From TDs new office in
Tel Aviv to Scotiabanks new partnerships in South America, Canadian banks are proving to have the
global mindset needed to ensure they are on top of future fintech opportunities.
John Armstrong
National Industry Leader, Financial Services
KPMG in Canada
In Q317, US fintech
companies received
investment of
$5.0B
across
142 deals
Investment in US fintech rises for the second-
straight quarter
Total investment in fintech in the US rose for the second straight quarter, while the total number of fintech
deals remained steady. While VC funding to fintech companies dipped slightly in Q317, it remained solid
next to previous quarters.
Fintech sectors maturing and broadening

Robo advisory remained a big bet in the US during Q317 with the use of hybrid (i.e. human and technology)
models gaining more traction over pure robo advisory. Institutions like Charles Schwab and Vanguard have
continued their development of hybrid robo advisory services, while pure player Betterment has expanded
into hybrid offerings using humans to answer pressing customer questions.
Meanwhile, the online lending space has matured this past year after seeing a number of scandals and legal
challenges during 2016. As of Q317, a number of the largest companies in this space have made
substantial progress towards profitability.
Blockchain, regtech, artificial intelligence and insurtech also remained high on the investment radar during
Q317, in addition to back office and B2B services.
M&A down significantly compared to the last 3 years

Total 2017 M&A value was at $4.8 billion at the end of Q317, well off pace compared to 2015 and 2016.
This decrease is likely not reflective of the overall fintech market, but rather the after effects of a glut of M&A
in recent years. A more positive sign of exit activity can be found in the total value of venture-backed exits of
US fintech companies. At the end of Q317, exit value for these companies stood at $1.1 billion, already
exceeding the total results for 2016 and matching the total from 2015.
First-time financings for fintech companies in the US bucking global trends

While the total number of first-time financings for fintech companies in the US is likely to remain down, the
total capital invested was on track to exceed 2016s total by a fair margin at the end of Q317. The ability of
fintech companies in the US to obtain early stage investments is significantly different compared to the first-
time financing experiences of fintechs globally.
The focus investors have placed over the past year on finding companies with strong business models and
well-defined paths to profitability has led companies to become smarter and more prepared for their funding
requests. As a result, while fewer companies have obtained funding, they are of higher quality than in the
past. This is reflected in the considerable increase in median deal size for angel/seed stage investments
from $1.1 million in 2016 to $2 million year-to-date in 2017.
The availability of higher quality companies may also be why VC seed/angel and early stage deal volume
steadied in the US in Q317 compared to in Europe and Asia where deal volumes continued to drop.
Median deal size down dramatically for late-stage deals

Year-to-date median deal size for late stage deals dropped dramatically compared to 2016, from $23.5
million to $11 million. The drop in median deal funding for late-stage deals may reflect the resonating impact
of the decline in early stage deals experienced in 2016 and early 2017. Given late-stage deals were quite
significant in 2015 and 2016, the decline might also reflect the fact that companies are currently making use
of earlier funding rounds before seeking a new influx of capital. 2018 could see a resurgence of activity
should these companies choose not to go public.
Investment in US fintech rises for the second-
straight quarter (contd)
Large fintechs and ecommerce companies expanding into adjacencies
Over the past 2 quarters, a number of fintechs and e-commerce companies have shown an increasing
focus on vertical integration as it provides a way to extend their ability to address the needs of their
customers in a frictionless way. For example, during Q317, Square announced plans to apply for an
industrial loan charter to expand its lending arm, while online bank Varo submitted an application for a
traditional bank charter.
At the same time, large e-commerce companies like Google, Amazon, Facebook and Apple have shown
increasing interest in engaging with federal banking regulators in the US so as to provide services
traditionally provided by financial institutions. These companies view the provision of such adjacent
services as a means to improve customer service and reduce friction across their value chains.
Corporate investors focusing on partnerships

While corporate participation dipped slightly compared to 2016, corporate investment continued to be
robust. More traditional financial institutions have recognized the value fintech offers both in terms of
modernization of existing services and extending value to customers. Partnering continues to be a key
mode for corporate participation in fintech. For example, during Q317, mortgage technology provider
Blend Labs announced new partnerships with Wells Fargo and US Bank.
Regulatory fatigue driving regtech evolution

The myriad state, federal and, for some banks, international financial regulations and reporting
requirements has led many financial institutions to become overwhelmed by the amount of effort and
budget required to be in compliance. Over the past few quarters, this has driven many to focus on finding
ways to use technology to streamline their compliance processes.
Interest in regtech is wide-ranging, from finding ways for financial institutions to become more proactive
(e.g. KYC, authentication) to artificial intelligence solutions that can be used to monitor and ID issues in
real time and technologies that can help identify and manage changing compliance requirements.
Trends to watch for in the US

Over the next few quarters, regtech interest and investment is expected to increase as traditional
financial institutions look for ways to link compliance automation to other end-to-end process
improvements such as improved customer service. Blockchain interest could also skyrocket should a
solution move into production in any significant way.
In Q417 and into 2018, corporate participation is expected to increase, particularly in insurtech. The
complexity of the insurance industry presents a unique challenge. Many fintechs are interested in
partnering with insurers in order to improve their potential, while corporates are interested in partnerships
to make innovation leaps.
It is also expected that the high-quality companies able to attract angel and seed funding in 2017 will
attract larger rounds in 2018. Exit activity is also expected to rise, although whether this will come
through M&A or IPOs remains to be seen.
Deal value sees a bump upward
Total US fintech investment activity (VC, PE and M&A) in fintech companies
2010 Q3'17
$20.0 250
$18.0
$16.0 200
$14.0
$12.0 150
$10.0
$8.0 100
$6.0
$4.0 50
$2.0
$0.0 0
2010 2011 2012 2013 2014 2015 2016 2017
Note: please note that the separate PE and M&A data sets both include PE buyouts as a transaction type per the Methodology se ction on page 81.
As the US is the most mature venture ecosystem, it stands to reason that relatively more fintech venture
activity would help prop up its overall fintech investment figures. Accordingly, the decline since the heyday of
2015 through early 2016 has been softer in the US than in other regions, and, moreover, thanks to overall
depth of its private markets, there can still be significant skew upwards as PE firms or corporate acquirers
make plays in fintech.
There is a lot of optimism in the US fintech market right now - from the maturation of early stage industries,
like robo advisory to the rapid acceleration of others, like insurtech and regtech. We should also see a
strong uptick in exit activity although whether through M&A or IPO we will need to wait and see.
Conor Moore
National Co-Lead Partner, KPMG Venture Capital Practice
KPMG in the US
Overall VC invested stays robust
Venture investment in fintech companies in the US
2010 Q3'17
$3.5 160
$3.0 140
120
$2.5
100
$2.0
80
$1.5
60
$1.0
40
$0.5 20
$0.0 0
2010 2011 2012 2013 2014 2015 2016 2017
The recent resurgence in fintech VC volume reversed in Q317, even as the total of VC invested remained
quite high. At this point, especially when regarding quarterly tallies, fintechs emerging status helps ensure it
will see such time-dependent variability. What is more important to note is that late-stage volume is still
holding steady at a robust level.
PE firms set to turn in a solid performance
Fintech PE activity in the US
2010 Q3'17
65
61
48 49 49
36
32
28
$3 $5 $2 $7 $13 $7 $6 $5
2010 2011 2012 2013 2014 2015 2016 2017 YTD

(Q3)
PE investment in the technology sector is generally growing rapidly, at nearly a fifth of overall PE deal volume in
the US in the year-to-date. Accordingly, it is of little surprise that PE firms are also staying active in the fintech
segment. Two significant buyouts made it into the top 10 fintech transactions for the US in the whole of Q317
Wafra Capital Partners purchase of Access Point Financial and Vista Equitys take-private of Xactly.
Fintech M&A activity in the US
2010 Q3'17
159 The slow decline in global

M&A is certainly playing
out on a regional basis as
132 well. This is typical of a
late-stage buying cycle,
120
especially given how
historically high general
101 asset prices are. It is also
90 important to note that in the
86 context of a highly active
83
2015, 2017 full-year
numbers are still on pace
to end up at a historically
54 healthy rate.
$2.5 $7.9 $3.0 $7.3 $10.7 $31.0 $9.8 $4.8
2010 2011 2012 2013 2014 2015 2016 2017 YTD

(Q3)
Fintech M&A is set to continue as startups realize that in order to manage complex regulatory
requirements and achieve scale, they need to partner with or be acquired by incumbents. Meanwhile,
traditional financial institutions also recognize the opportunity fintechs present in terms of reducing their
time to market and getting ahead even if theyve had an early start to their innovation and digital programs.
Anthony Rjeily
Principal, Financial Services Digital and Fintech Practice Lead
KPMG in the US
Early-stage valuations rise once again, as the
median late-stage financing remains low
Median fintech venture financing size ($M) in the US
2010 Q3'17
Angel/Seed Early VC Later Stage VC $23.5
$20.1
$16.0
$11.3 $11.3
$8.5 $8.3
$7.7
$7.0 $6.8
$5.4
$4.1 $4.2
$3.3 $3.0
$2.5 $2.0
$1.4 $1.1
$0.6 $0.8 $0.5 $0.7 $0.8
2010 2011 2012 2013 2014 2015 2016 2017 YTD

(Q3)
Median fintech venture pre-valuation ($M) in the US

2012 Q3'17
$196
$130
$95
$80
$75
$69
$32.9
$26.9 $23.6
$13.3 $14.7 $15.6
$7.3 $6.3 $7.7
$4.5 $4.3 $4.8
2012 2013 2014 2015 2016 2017 YTD (Q3)
CVC involvement slides, stays strong
Fintech venture capital activity in the US with corporate venture participation
2010 Q3'17
19%
17%
15%
12%
11%
10%
9%
8%
$0.1 $0.4 $0.5 $1.7 $3.7 $2.3 $1.7

$0.2
2010 2011 2012 2013 2014 2015 2016 2017 YTD
(Q3)
After spending years and significant costs on regulatory remediation activities, traditional financial
institutions are now seeking new and dynamic ways to optimize their compliance spend. They are shifting
towards more proactive, intelligent automated solutions to become more effective and efficient as well as
provide more value to their customers, shareholders, and business.
John Ivanoski
Global Head of Regtech, KPMG International
Partner, KPMG in the US
Mid-Atlantic slides significantly in VC invested
Fintech venture investment (#) Fintech venture investment (#)
in the US by region in the US by region
2016 2017 YTD (Q3)
5.8% Great Lakes 6.2%
Mid-Atlantic
Midwest 27.0%
42.4%
42.3% 29.3%
Mountain
New England
South
5.0% 0.9%
Southeast
5.1%
5.1% 1.3% 7.4% 6.2% 4.7%
5.8% West Coast
5.1%
Fintech venture investment ($) Fintech venture investment ($)

in the US by region in the US by region
2016 2017 YTD (Q3)
2.8%
Great Lakes
4.9%
Mid-Atlantic
Midwest 21.6%
33.4%
Mountain
54.8% 1.7% New England 0.3%

56.2%
1.3% 3.0%
South 1.4%
3.5%
Southeast
9.1%
0.2%
West Coast
3.0%
2.7%
First-time VC invested remains robust
First-time financings of fintech companies in the US
2010 Q3'17
Even though the tally of

completed first-time
financings of fintech
enterprises remains muted,
VC invested remains quite
193 strong. Although a much
slower Q3 than expected
166 resulted in 2017 seeming
153 unlikely after all to overtop
2015s massive $438 million,
129 such a strong performance in
120 terms of VC invested even as
volume diminishes is
91 impressive. Moreover, it
85
demonstrates that fintech is
also benefiting from the
venture industrys significant
48
hoard of dry powder, with
plenty of VC fund managers
still tending to be more
$90 $240 $164 $357 $274 $438 $308 $253
cautious than in past years,
2010 2011 2012 2013 2014 2015 2016 2017 but willing to write hefty
YTD (Q3) checks.
Capital invested ($M) Deal count
2017 recording significant strength in exit value
Venture-backed exits of US fintech companies
2010 Q3'17
41
36
33
26
21
19
10
$420 $408 $1,146 $451 $2,646 $1,098 $1,001 $1,096
2010 2011 2012 2013 2014 2015 2016 2017 YTD

(Q3)
Exit value ($M) Exit count
Source: Pulse of Fintech Q3'17, Global Analysis of Investment in Fintech, KPMG International (data provided by PitchBook) November 7, 2017
Until this year, venture-backed fintech companies exited at a steadily rising clip, boding well for early backers
that were seeking liquidity. The decline in the volume of venture-backed exits of fintech businesses does not
necessarily bode well for venture firms portfolios, but what does still stand out is that significantly sized exits
can still occur, as evidenced by the massive purchase of Intacct by Sage Group for no less than $850 million.
Top 10 US fintech deals in Q3'17
7
2
3 9 8
10 1
5
4
1 Intacct $850M, San Jose, CA 6 Service Finance Company $304M, Boca

Institutional/B2B Raton, FL
M&A Lending
CardConnect $750M, King of Prussia, M&A
2 PA FastMatch* $153M, New York
7
Payments/transactions Payments/transactions
Public-private M&A M&A
Xactly $564M, San Jose, CA Bread Operations $126M, New York
3 Institutional/B2B 8 Institutional/B2B
Secondary buyout Series B
Merchants Choice Payment Solutions
4 $470M, Shenandoah, TX Coinbase $108.1M, San Francisco
9 Payments/transactions
Payments/transactions
Series D
M&A
5 Access Point Financial $350M, Atlanta Blend Labs $100M, San Francisco
10
Lending Lending
Buyout Series D
*Note: In the prior edition of the Pulse of Fintech, the closing date of FastMatch was assumed to be in Q2 given all available data; since then,
some confidential information has been disclosed which revealed that the transactions official closing date was officially pushed forward into Q3.
In Q317, investment
in fintech companies
in Europe hit
$1.66B
across
73 deals
European fintech activity remains steady in Q317
While overall investment in European fintech dipped slightly quarter-over-quarter, investment levels
remained strong. VC investment was particularly solid, with over $700 million invested across 52 deals
making it one of the strongest quarters ever for VC investment, driven in large part by increasing deal sizes.
The actual number of deals declined this quarter, primarily at the early and angel/seed deal stages.
Low interest rates, pressure to lower costs, and corporates seeking the disruptive technologies that can
propel them to the top helped drive fintech investment this quarter. Positive government initiatives have also
contributed, with several countries looking to attract startups by offering a more open regulatory
environment, incentives and space to grow.
In Q317, investors appeared to favor follow-on investments into later stage companies, over seed and
angel stage investments. At the same time, competition for these late stage deals continued to drive up
valuations. The draw to later-stage companies can be seen in the large investments made in the more
mature lending and payments spaces: six of the top 10 largest deals in Europe in Q317 went to companies
in these sectors.
Early stage companies, meanwhile, continued to face significant pressure from VC investors to provide a
clear path to growth, a product able to fit a defined industry need, a proven team, evidence of traction in the
market, and an established customer base in order to win investments.
Corporates increasingly involved in fintech deals

Corporate VC investment continued to gain prominence in Q317 reaching $647 million year-to-date,
compared to $419 million in all of 2016. Corporate participation also increased dramatically, from 13% of
deals in 2016 to 20% of deals so far in 2017. This increase reflects the fact that more traditional financial
institutions in Europe are turning to fintech companies whether through direct investment, partnerships,
M&A or other models to help advance their digital transformation initiatives.
Avivas recent majority investment into digital wealth management startup Wealthify is one example. The
acquisition will allow Aviva to offer additional services to customers through their MyAviva portal, while
growing Wealthifys earnings through exposure to Avivas client base.
Increasing focus on B2B

Europes B2B fintech industry is booming. As of September, B2B-focused fintechs had secured 46% of all
fintech funding raised in the EU this year. B2C fintech remains strong however many corporate investors
increasingly see B2B as an area of opportunity to broaden their reach and scale more quickly.
Financial institutions have eagerly supported this shift as part of their desire to access innovative
technologies that can help them improve efficiencies, decrease costs, respond to shifting customer needs,
and extend their services to harder to reach markets, including the attractive SME sector.
European fintech activity remains steady in
Q317 (contd)
Fintech companies seeking banking licenses in the UK
In the UK, a number of fintechs have been working to obtain banking licenses in an effort to provide services
that were once exclusively available through traditional banks, such as the peer-to-peer lending business
Zopa. Some fintechs have even made acquisitions themselves in order to leverage an existing banking
license. For example, in Q317, digital challenger Tandem in the UK has signed an agreement to acquire
Harrods Bank (subject to regulatory approval), which would allow Tandem to launch its services UK and
operate under Harrods existing license.
UK remains hotspot for fintech investment

Despite concerns about the effects of Brexit, London remains a hotbed of fintech activity. Companies have
continued to move forward with a business as usual attitude while putting contingency plans in place to
manage potential impacts. There has not been the exodus of established companies some might have
expected and, while new startups may be eyeing other European centers, seven of the top ten European
deals this quarter went to London-based companies, suggesting fintech investment is not going to fade from
the UK anytime soon.
France offering incentives in an effort to attract fintech startups

The Government of France is working all-out to attract fintechs away from the UK. The recent introduction of
fintech friendly regulations, combined with tax incentives aimed at encouraging innovation, have contributed
to the steady growth of fintech in the country. The rapid evolution of Frances fintech ecosystem has also
been supported by the formation of LaFrench tech and new incubators including the largest incubator in
the world: Station F. With French President Macron seen as fiercely pro-business, it is expected that fintech
will remain a priority for the foreseeable future.
Numerous fintech hubs making mark in Germany

Rather than focus on supporting one major fintech hub, Germany has fostered innovation initiatives across
the country in order to foster more widespread fintech innovation. In addition to Berlin, fintech hubs have
cropped up in Munich, Hamburg, and Frankfurt, in addition to smaller cities like Stuttgart and Cologne.1 A
number of new accelerators and incubators have appeared as a result, including InsurLab in Cologne.
During Q317, FinLeap, the startup platform behind Germany's solarisBank, also raised 39 million to
support its ongoing fintech incubator.
Trends to watch for in Europe

Increased regulations and the imminent implementation of PSD2 will likely move regtech and open banking
solutions into the investment spotlight heading into Q417. Meanwhile, corporate investment is expected to
propel investment in insurtech, with partnerships seen as one of the best ways to manage the industrys
complexity. Over the next few quarters, there may also be some consolidation among challenger banks as
they seek to gain the scale and product breadth they need to be competitive.
Given signs of decreasing seed and angel stage funding, fintech startups - particularly those with a core
focus on blockchain - may look toward ICOs as an alternative funding mechanism. With regulators
continuing to keep a close eye on ICOs, an increase in activity could spur them to put ICOs under a
regulatory microscope.
New fintech ecosystems supported by platforms such as B-Hive in Brussels will continue to emerge
throughout Europe as cities and countries work to promote their local fintech capabilities.
1 https://thenextweb.com/eu/2017/05/24/how-germany-is-uniting-its-tech-hubs-to-build-its-own-silicon-valley/
One down quarter belies recent strength
Total European fintech investment activity (VC, PE and M&A) in fintech companies
2010 Q3'17
$7.0 140
$6.0 120
$5.0 100
$4.0 80
$3.0 60
$2.0 40
$1.0 20
$0.0 0
2010 2011 2012 2013 2014 2015 2016 2017
page 81.
The fintech sector in Europe is prone to record quarterly vagaries in overall investing volume, especially as it
does not benefit from the significant propping-up of hefty VC investing such as observed in the US.
Accordingly, the significantly low volume in completed fintech transactions in Europe in Q317 should not be
overinterpreted. It is likelier that activity returns to relatively healthy levels to close out the year in the continent.
Investment in European fintech dipped in Q3'17, however the outlook remains strong. During the past
quarter we saw a number of mega-deals in Europe including ConCardis, Prodigy Finance and Neyber.
Over the first three quarters of the year, median late state deal size has remained well above 2016 levels
and corporate VC investment has skyrocketed. We anticipate seeing an increase on both of these fronts as
the European fintech ecosystem continues to mature."
Dorel Blitz
Director, Head of Fintech
KPMG in Israel
VC invested and volume diverge significantly
Venture investment in fintech companies in Europe
2010 Q3'17
$0.8 120
$0.7
100
$0.6
80
$0.5
$0.4 60
$0.3
40
$0.2
20
$0.1
$0.0 0
2010 2011 2012 2013 2014 2015 2016 2017
The European venture scene is largely a patchwork of highly active metropolises. As the fintech scene is not
so different, it is clear that the significant decline in top-line VC volume in Q317 was more due to
simultaneous declines in angel, seed and early-stage funding activity. Given the overall venture investing
climate, it is possible that early-stage financing picks back up, but angel and seed investors seem to have by
and large significantly dialed down their activity given current high prices and ramped-up macroeconomic and
political risks.
Fintechs are struggling to find sufficient investment at the early stages. Early startups have to offer an
almost perfect offering that combines the right team with a stellar solution that includes the right technology
with IP that can solve a big problem. If they get all the pieces right, theyre rewarded with sizeable funding
from eager investors.
Arik Speier
Co-Leader, KPMG Enterprise Innovative Startups Network and Head of Technology
KPMG in Israel
PE activity stays strong
Fintech PE activity in Europe
2010 Q3'17
54
42 43
39
31 31
23 22
$5 $4 $4 $4 $16 $11 $3 $4
2010 2011 2012 2013 2014 2015 2016 2017 YTD

(Q3)
M&A set to remain even with 2016
Fintech M&A activity in Europe
2010 Q3'17
136
100
90
84
79
71 72
67
$5.1 $5.2 $3.1 $3.0 $16.5 $9.5 $3.5 $3.1
2010 2011 2012 2013 2014 2015 2016 2017 YTD

(Q3)
Especially in the more fragmented European financial sector, and in the context of grappling with increased
policy and macroeconomic risks in the ongoing ripple effects of the banking crises, it is clear financial
institutions are looking to remain active in fintech dealmaking. Whether to streamline processes, stay abreast
of innovation or some combination of both, M&A within fintech remains active on the continent.
Financing sizes stay high
Median fintech venture financing size ($M) by stage in Europe
2013 Q3'17
$17.3
$15.6
$10.2
$5.8
$4.3
$3.7 $3.6
$3.0 $3.2 $3.0
$1.2
$0.6 $0.9
$0.3 $0.5
2013 2014 2015 2016 2017 YTD (Q3)
It is worth noting that especially as there remain significant amounts of dry powder globally underpinning
venture activity, median round sizes remain quite inflated, even for fintech. When it comes to Europe, a small
crop of mature fintech startups are keeping late-stage financing numbers high in particular in 2017 to date.
Corporate VC participation hits a new high
Fintech venture activity in Europe with corporate VC participation
2010 Q3'17
20%
14%
13%
11%
11% 10%
9%
5%
$2.7 $25.0 $93.1 $109.8 $408.8 $333.9 $419.1 $647.2
2010 2011 2012 2013 2014 2015 2016 2017 YTD

(Q3)
Capital invested ($M) % of total deal count
As the end of 2017 approaches, it is easier to assess the momentum of certain trends by charting them out on a
yearly basis. Accordingly, as hinted at by quarterly figures, corporate venture arms are significantly propping up
overall fintech VC activity, participating in a full fifth of all completed transactions in 2017 to date.
Traditional financial institutions (Fis) recognise that digital transformation is critical. Build or buy is always
an important consideration. FIs have started to heavily invest in Fintech companies as a strategy to give
them the direct access to the new technologies they need to compete."
Anna Scally
Partner, Head of Technology and Media and FinTech Leader
KPMG in Ireland
UK deal value reverts to subdued level
Fintech VC, PE and M&A activity in the United Kingdom
2014 Q3'17
$2,500 60
50
$2,000
40
$1,500
30
$1,000
20
$500
10
$0 0
2014 2015 2016 2017
page 81.
London-based fintechs can still command plenty of capital from investors, even in the midst of ongoing
political and economic uncertainty, as the list of top 10 European fintech transactions for Q317 reveals
below. That said, even perhaps the preeminent global financial hub can see significant skew in its fintech
investing trends on a quarterly basis, as seen in the slump in aggregate deal value from Q2 to Q317.
London-based startups rake in all Q3 dollars
Fintech venture activity in the UK versus London
2010 Q3'17
$600.0 50
45
$500.0
40
35
$400.0
30
$300.0 25
20
$200.0
15
10
$100.0
5
$0.0 0
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q
2013 2014 2015 2016 2017
UK VC invested without London ($M) London VC invested ($M) # of deals closed
The extent to which European metropolises host venture activity, especially when it comes to certain areas, is only
even more exaggerated when it comes to London. In Q317, the UK saw one single round with a known value
outside of the capital.
UK VC activity was exceptionally strong this quarter in particular in the B2B sector. Fintechs
realize they have the opportunity to have a wider impact on the financial services sector and are
looking to build solutions to help drive operational efficiencies within financial institutions. This
shift is paying off and investors are paying close attention
Rachel Bentley
Fintech Senior Manager
KPMG in the UK
ConCardis buyout boosts Germanys Q3 totals
Fintech VC, PE and M&A activity in Germany
2014 Q3'17
$900 25
$800
20
$700
$600
15
$500
$400
10
$300
$200
5
$100
$0 0
2014 2015 2016 2017
page 81.
Germany has seen a dramatic increase in the amount of corporate VC activity, particularly from insurance
companies. Banks have traditionally led the way in CVC investments. Insurance companies are now
looking to catch up, and one approach has been to provide significant investment in incubators across
Germany that focus on the development of insurance-focused technology.
Sven Korschinowski
Partner, Financial Services
KPMG in Germany
A down Q3 stil sees a diversified fintech scene
Fintech venture activity in Germany versus Berlin
2013 Q3'17
$200.0 18
$180.0 16
$160.0
14
$140.0
12
$120.0
10
$100.0
8
$80.0
6
$60.0
4
$40.0
$20.0 2
$0.0 0
2013 2014 2015 2016 2017
Germany VC invested without Berlin ($M) Berlin VC invested ($M) # of deals closed
Fintech VC in France booms to a new high
Fintech venture activity in France
2013 Q3'17
$90.0 12
$80.0
10
$70.0
$60.0 8
$50.0
6
$40.0
$30.0 4
$20.0
2
$10.0
$0.0 0
2013 2014 2015 2016 2017
Capital invested ($M) # of deals closed
Until recently, the regulations in France made fintech investment more challenging. Now that regulations
have become progressively more fintech friendly, investors have new incentive to catch up. The
combination of tax incentives and a strong financing ecosystem has helped boost investment activities for
fintech startups at every stage of their development.
Mikael Ptachek
Head of Fintech
KPMG in France
France stil sees less concentration than the UK
Fintech venture activity in France versus Paris
2013 Q3'17
$90.0 12
$80.0
10
$70.0
$60.0 8
$50.0
6
$40.0
$30.0 4
$20.0
2
$10.0
$0.0 0
2013 2014 2015 2016 2017
France VC invested without Paris ($M) Paris VC invested ($M) # of deals closed
Top 10 European fintech deals in Q3'17
9
6 10
3
5 4
2
1
7
8
1 ConCardis $806M, Eschborn, Germany 6 Receipt Bank $50M, London

Payments/transactions Institutional/B2B
Secondary buyout Series B
2 Prodigy Finance $240M, London 7 Younited Credit $47.2M, Paris

Lending Lending
Series C Late-stage VC
3 Neyber $149.1M, London 8 SimCorp Italiana $41.3M, Milan

Lending Insurtech
PE growth M&A
4 Monitise $97.3M, London 9 Digital Shadows $26M, London

Payments/transactions Institutional/B2B
Public-private M&A Series C
5 Revolut $76M, London 10 Monzo $25.4M, London

Payments/transactions Consumer finance
Series B Series B
In Q317, investment
in fintech companies
in Asia hit
$1.21B
across
41 deals
Fintech investment in Asia jumps in Q317
In Q317, fintech investment in Asia grew to over $1 billion for the first time this year, despite a drop-off in
the number of fintech deals. VC investment was particularly strong, reaching a 4 quarter high of $1.06
billion. While China received the majority of Q317 investment, companies in Hong Kong, India and Korea
accounted for several of the regions top 10 deals (i.e. TNG Fintech Group, Korbit, Freecharge Payments
Technologies, CompareAsia Group, and Capital Float).
Early-stage deal volume plummets

During Q317, deals volume in Asia decreased significantly, primarily as a result of a plunge in the number
of angel and seed stage deals. Early-stage deals remained relatively steady, while the number of late stage
deals experienced a slight uptick.
Corporate participation high, despite funding drop-off

Corporates continued to drive a large percentage of fintech deals in Asia, participating in 22 percent of deals
so far in 2017 compared to 18 percent in 2016. Despite the increase in participation, corporate investments
have fallen substantially, from $6.8 billion in 2016 to $840 million year-to-date. This slowdown likely reflects
concerns around the Chinese governments tightening of financial controls. As the governments policies are
clarified, corporate investment may increase.
China continues to see biggest deals in Asia

Six of Asias largest Q317 deals occurred in China, including three of the regions four $100 million+
megadeals: Dianrong ($220 million, Series D), Feidee ($200 million, Series C), and Dashu Finance ($117
million, Series C).
Chinas tech giants have also spurred investment activity in Southeast Asia. For example, in recent quarters
Alibaba, JD Finance, and Tencent have all made regional investments in order to expand their reach. Alipay
is looking even more globally, using acquisitions to drive expansion into all countries with a significant
Chinese footprint.
Chinese fintechs succeeding with IPOs

During Q317, a number of Chinese fintechs either conducted IPOs outside of the Chinese market or
indicated plans to do so. For example, Qudian, one of Chinas largest online lenders, went public in New
York, with shares closing up 22 percent on the first day of trading. Chinese peer-to-peer (P2P) lender Ppdai
also announced plans for a New York IPO.
Insurtech Zhong An Chinas first fully online insurance company also hosted a successful IPO in Hong
Kong during Q317, raising $1.5 billion on a valuation of $10 billion.
Insurtech slowly gaining momentum

Q317 saw increasing interest in insurtech in Asia, although investment activity remains considerably behind
other jurisdictions. Insurtech investment, particularly in China, has been driven by corporates interested in AI
and data analytics. Recently, two major insurers China Life and Ping An Insurance - have announced
separate $1 billion funds: Ping An will use its fund to invest in fintech and healthtech while China Life has
partnered with internet search provider Baidu to create a fund aimed at investing in AI and finance
operations.1
1 https://www.ft.com/content/b16a7fa7-7588-33d6-a634-18e5af72c102;
https://www.reuters.com/article/us-china-fund-internet/china-life-and-baidu-to-launch-1-billion-internet-fund-idUSKCN1B41EX
Fintech investment in Asia jumps in Q317 (contd)
Singapore continues to evolve into leading fintech hub
The Monetary Authority of Singapore (MAS) remained the key driver behind the countrys fintech ecosystem
in Q317. With 2018 a key checkpoint year for Singapores Smart Nation 2020 strategy, the MASs focus on
innovation is only expected to grow. One major priority for the MAS has been blockchain. To date, it has
launched 10 blockchain projects moving them through concept development to proof of concept. In 2018,
some of these initiatives are expected to go to pilot, with the hope of implementation prior to 2020.
Focus on enabling technologies in Southeast Asia

In Southeast Asia, fintech evolution has focused primarily on enablement of traditional financial institutions
rather than disruption. In a region where deal sizes remain relatively small, this focus provides an accessible
avenue for growth as B2B solutions do not require the same resources to scale. For example, the region
has seen some growth in robo advisory, with technologies focused on enabling financial institutions to
provide better customer service. Smaller banks in Singapore and Southeast Asia have also been working
with fintechs to service underbanked and unbanked communities.
Hong Kong expands fintech sandboxes

The government of Hong Kong, through its industry regulators, continues to be a key driver of fintech
innovation. During Q317, the Hong Kong Monetary Authority announced upgrades to its existing fintech
sandbox, while the Securities and Futures Commission and the Insurance Authority of Hong Kong both
announced the development of specific fintech sandboxes. The availability of widespread opportunities to
foster and test fintech solutions likely reflects Hong Kongs increasing desire to be seen as a base for Asia
fintech.
China continues to tighten financial controls

In recent quarters, the Chinese central government has tightened controls around internet finance,
particularly related to customer-facing activities.1 Consequently, many fintechs that initially had a customer
focus have shifted to B2B models. This has led to a boom in partnerships, with fintechs focused on providing
credit assessment, risk assessment, and other financial solutions to licensed businesses rather than to
consumers.
In Q317, the Central Bank also established a committee focused on analyzing the impact of fintech on
financial sector stability and on applying regtech solutions to help manage innovation. It also announced the
creation of Nets Union Clearing Corporation a clearing house for mobile payments. 2
ICOs also came under scrutiny in China this quarter. While ICO activity in China raised over $400 million
early in 2017, in Q317, Chinas Central Bank banned ICOs, suggesting they disturbed financial order.3
This ban may be temporary in order to give the Central Bank more time to explore the issue and define
its position.
Trends to watch for in Asia

Over the next few quarters, Corporate VC (CVC) investments are expected to grow as more traditional
corporates look to make strategic investments. The entire fintech ecosystem in Asia is also expected to
expand as additional fintech hubs arise in different jurisdictions.
In China, the focus of startups is expected to continue to shift more to B2B solutions given the expanded
controls over consumer-facing activities. P2P lending is also expected evolve as a result of new regulations.
While the large P2P lenders may continue to grow, smaller lenders will likely struggle and either consolidate
or disappear.
1 http://www.reuters.com/article/us-china-internet/china-to-further-tighten-its-internet-controls-idUSKBN1830AG
2 https://www.forbes.com/sites/jinshanhong/2017/08/18/how-chinas-central-bank-is-clamping-down-on-the-mobile-payment-industry/#63d009db50be
3 http://fortune.com/2017/09/12/cryptocurrency-china-initial-coin-offerings/
Deal value bounces upward
Fintech VC, PE and M&A activity in Asia
2010 Q3'17
$6.0 90
80
$5.0
70
$4.0 60
50
$3.0
40
$2.0 30
20
$1.0
10
$0.0 0
2010 2011 2012 2013 2014 2015 2016 2017
page 81.
Thanks in no small part to a pair of massive venture financings, Q317 saw a significant resurgence in
aggregate fintech deal value. That occurrence, in tandem with the plummet in completed transaction volume,
mainly speaks to how the Asian fintech scene is still prone to seeing market leaders emerge rather rapidly in
certain key segments that can dominate quarterly fundraising tallies by their tendency to rake in vast
amounts of capital from non-traditional VCs and global venture investors.
Plunge in angel and seed volume responsible
for Q3 decline
Fintech venture investment in Asia
2010 Q3'17
$6.0 80
70
$5.0
60
$4.0
50
$3.0 40
30
$2.0
20
$1.0
10
$0.0 0
2010 2011 2012 2013 2014 2015 2016 2017
Partially attributable to the opacity of such transactions details when it comes to the emerging venture
ecosystem of the Asia-Pacific region, and also a testament to just how volatile their trends can be, the sharp
Q3 downturn was primarily owing to a precipitous decline in angel and seed financing.
PE activity remains softer than in years past
Fintech PE activity in Asia
2010 Q3'17
10
7 7
6 6
$1.0 $0.4 $0.1 $0.1 $0.2 $2.1 $1.8 $0.4

2010 2011 2012 2013 2014 2015 2016 2017 YTD
Deal Value ($B) Deal count (Q3)
Pace of M&A remains respectable
Fintech M&A activity in Asia
2010 Q3'17
41
34 34
25
17
12
11
10
$310.5 $65.8 $84.0 $500.3 $2,876.6 $2,735.2 $1,836.7 $462.6
2010 2011 2012 2013 2014 2015 2016 2017 YTD

(Q3)
Deal value ($M) # of closed deals
When it comes to fintech, the push to acquire fast-growing startups focused on consumer offerings that
cater to the rapidly expanding middle class, as well as payments-focused businesses that can align with
Chinas push to orient the region toward a more unified economic ecosystem, will likely continue to drive
M&A going forward.
CVCs continue to contribute significantly
Fintech venture capital activity in Asia with corporate VC participation
2013 Q3'17
24%
22%
17%
14%
14%
$0.1 $0.2 $4.2 $6.8 $0.8

2013 2014 2015 2016 2017 YTD (Q3)
Corporate venture arms are more dominant in Asia than in any other given venture ecosystem, which makes
sense given the relative development of capital markets within the region. Accordingly, their commanding
portion of nearly a quarter of all fintech VC investment makes sense, yet it is worth noting that the total of VC
invested suggests an earlier-stage focus than is often seen in other sectors, as well as the absence of mega-
deals in fintech VC as of yet.
VC invested and volume tick upwards
Fintech venture investment in China
2013 Q3'17
$5,000.0 30
$4,500.0
25
$4,000.0
$3,500.0
20
$3,000.0
$2,500.0 15
$2,000.0
10
$1,500.0
$1,000.0
5
$500.0
$0.0 0
2013 2014 2015 2016 2017
As Chinas central government continues to tighten controls around customer-facing internet finance
activities, we have seen a major shift in fintech business strategy. Fintech companies that might have
started with a customer focus are now embracing a B2B model, providing their solutions to traditional
financial institutions in order to avoid the growing compliance requirements.
Arthur Wang
Partner, BJO and Financial Services
KPMG in China
Indian fintech VC volume skews down
Fintech venture investment in India
2013 Q3'17
$900.0 25
$800.0
20
$700.0
$600.0
15
$500.0
$400.0
10
$300.0
$200.0
5
$100.0
$0.0 0
2013 2014 2015 2016 2017
A lower quarter for Singapore
Fintech VC, PE and M&A activity in Singapore
2014 Q3'17
$120 12
$100 10
$80 8
$60 6
$40 4
$20 2
$0 0
2014 2015 2016 2017
page 81.An adjustment has been made to some of the prior quarters due to a reassessment of the underlying companies to ensure accu racy
of the underlying dataset.
The role of timing when it comes to the level of fintech transactional volume in a given country, especially
one that, when all is said and done, is as large as Singapore, cant be underrated. Accordingly, another down
quarter isnt that historically uncommon, especially as the nascent fintech hub is still developing. That said,
activity has remained consistent over the past several quarters, since the start of 2015.
The MAS is putting a lot of emphasis into the development of blockchain, with high expectations for
successful pilot projects heading into 2018. But blockchain isnt the only big ticket fintech focus in
Singapore. Regtech is also a high priority from using AI to make workflow processes more efficient to
finding ways to provide real time or near-real time monitoring of transactions.
Tek Yew Chia

Head of Financial Services Advisory
KPMG in Singapore
After an upsurge, a decline in Q3
Fintech VC, PE and M&A activity in Australia
2014 Q3'17
$500 12
$450
10
$400
$350
8
$300
$250 6
$200
4
$150
$100
2
$50
$0 0
2014 2015 2016 2017
Note: please note that the separate PE and M&A data sets both include PE buyouts as a transaction type per the Methodology section on page 81.
The above chart does not include the AUD 40 million investment in zipMoney by Westpac as this was a private investment in public equity and
such deal types are specifically excluded from the scope of this report.
Fintech financing volume took a bit of a slide in Q317 in Australia. In the wake of Rubik Financials
transaction in Q217, deal value especially took a hit, in more a testament to the still-ongoing growth of
the fintech ecosystem within the nation than anything else.
Top 10 fintech deals in Asia in Q3'17
6
5
10 1
2 3
7
4 8
9
1 Dianrong $220M, Shanghai 6 Iqianbang.com $80M, Beijing

Lending Lending
Series D Series B
Feidee $200M, Shenzhen Freecharge Payment Technologies
2 7 $59.8M, Mumbai
Consumer finance
Series C Payments/transactions
M&A
3 Dashu Finance $117M, Shenzhen CompareAsia Group $50M, Hong Kong
Lending 8 Consumer finance
Series C Series B
4 TNG Fintech Group $115M, Hong Kong Capital Float $45.6M, Bangalore
Consumer finance 9
Lending
Series A Series C
5 Korbit $90M, Seoul
Fangsiling $45M, Nanjing
Payments/transactions 10
Consumer finance
M&A
Series E
KPMG Enterprise Innovative Startup Network. From
seed to speed, were here throughout your journey
Contact us:
Brian Hughes Arik Speier

Co-Leader, KPMG Enterprise Co-Leader, KPMG Enterprise
Innovative Startups Network Innovative Startups Network
E: [email protected] E: [email protected]
KPMG Fintech global network
Sweden
Norway
Canada Denmark Netherlands

Ireland UK Germany
Luxembourg Netherlands
France Switzerland
USA Spain Korea
Italy Israel Japan
China
Taiwan
India
Mexico UAE Hong Kong
Nigeria
Brazil Singapore
Australia
South Africa
Contact us:
Ian Pollari Murray Raisbeck

Global Co-Leader of Fintech, Global Co-Leader of Fintech,
KPMG International KPMG International
E: [email protected] E: [email protected]
About KPMG Enterprise
You know KPMG, you might not know KPMG Enterprise.
KPMG Enterprise advisers in member firms around the world are dedicated to working with businesses like yours.
Whether youre an entrepreneur looking to get started, an innovative, fast growing company, or an established
company looking to an exit, KPMG Enterprise advisers understand what is important to you and can help you
navigate your challenges no matter the size or stage of your business. You gain access to KPMGs global
resources through a single point of contact a trusted adviser to your company. Its a local touch with a global reach.
The KPMG Enterprise global network for innovative startups has extensive knowledge and experience working with
the startup ecosystem. Whether you are looking to establish your operations, raise capital, expand abroad, or simply
comply with regulatory requirements we can help. From seed to speed, were here throughout your journey.
About KPMG Fintech

The Financial Services industry is transforming with the emergence of innovative new products, channels and
business models. This wave of change is primarily driven by evolving customer expectations, digitalisation, as well as
continued regulatory and cost pressures. KPMG is passionate about supporting our clients to successfully navigate
this transformation, mitigating the threats and capitalising on the opportunities. KPMG Global Fintech comprises of
partners and staff in over 35 fintech hubs around the world, working closely with financial institutions and fintech
companies to help them understand the signals of change, identify the growth opportunities and to develop and
execute on their strategic plans.
We acknowledge the contribution of the following individuals who assisted in the
development of this publication:
Jonathan Lavender, Global Chairman, KPMG Enterprise, KPMG International

Ian Pollari, Global Co-Leader of Fintech, KPMG International and Partner and National Sector Leader, Banking, KPMG Australia
Murray Raisbeck, Global Co-Leader of Fintech, KPMG International and Partner, Insurance, KPMG in the UK
Arik Speier, Co-Leader, KPMG Enterprise Innovative Startups Network and Head of Technology, KPMG in Israel
Brian Hughes, Co-Leader, KPMG Enterprise Innovative Startups Network and National Co-Lead Partner, KPMG Venture Capital
Practice, KPMG in the US
Anna Scally, Head of Technology and Media and FinTech Leader, KPMG in Ireland
Anne Joyce, Senior Marketing Manager, Banking Capital Markets and Fintech, KPMG International
Anthony Rjeily, Principal, Financial Services Digital and Fintech Practice Lead, KPMG in the US
Anton Ruddenklau, Partner & Head of Digital & Innovation, Financial Services, KPMG in the UK
Arthur Wang, Partner, BJO and Financial Services, KPMG in China
David Milligan, Global lead, Matchi and Associate Director, KPMG in South Africa
Conor Moore, National Co-Lead Partner, KPMG Venture Capital Practice, KPMG in the US
Chris Higgins, Senior Manager, Fintech, KPMG in the UK
Dorel Blitz, Head of Fintech, KPMG in Israel
Eamonn Maguire, Global Head of Digital Ledger Services, KPMG International, Managing Director, KPMG in the US
Joe Cassidy, Partner, Financial Services Advisory, KPMG in the UK
John Armstrong, National Industry Leader, Financial Services, KPMG in Canada
John Ivanoski, Global Head of Regtech, KPMG in the US
Lindsay Hull, Associate Director, KPMG Enterprise Global Innovative Startups Network, KPMG in the US
Melany Eli, Head, Marketing and Communications, Global Executive, KPMG Enterprise, KPMG International
Mikael Ptachek, Head of Fintech, KPMG in France
Rachel Bentley, Fintech Senior Manager, KPMG Enterprise, KPMG in the UK
Safwan Zaheer, Director, Financial Services Digital and Fintech, KPMG in the US
Sigrid I Seibold, Partner, Financial Services, KPMG in the US
Sonia Chiu, Manager, KPMG Enterprise, KPMG in the UK
Sven Korschinowski, Partner, Financial Services, KPMG in Germany
Tek Yew Chia, Head of Financial Services Advisory, KPMG in Singapore
Methodology
Within this publication, only completed transactions regardless of type are tracked by PitchBook, with all deal
values for general M&A transactions as well as venture rounds remaining un-estimated. Standalone datasets on
private equity activity, however, have extrapolated deal values.
Please note that the MESA and Africa regions are NOT broken out in this report. Accordingly, if you add up the
Americas, Asia-Pacific and Europe regional totals, they will not match the global total, as the global total takes into
account those other regions. Those specific regions were not highlighted in this report due to a paucity of datasets
and verifiable trends.
Venture Deals
PitchBook includes equity investments into startup companies from an outside source. Investment does not
necessarily have to be taken from an institutional investor. This can include investment from individual angel
investors, angel groups, seed funds, venture capital firms, corporate venture firms, and corporate investors.
Investments received as part of an accelerator program are not included, however, if the accelerator continues to
invest in follow-on rounds, those further financings are included. All financings are of companies headquartered in
the US.
Angel/seed: PitchBook defines financings as angel rounds if there are no PE or VC firms involved in the company to
date and it cannot determine if any PE or VC firms are participating. In addition, if there is a press release that
states the round is an angel round, it is classified as such. Finally, if a news story or press release only mentions
individuals making investments in a financing, it is also classified as angel. As for seed, when the investors and/or
press release state that a round is a seed financing, or it is for less than $500,000 and is the first round as reported
by a government filing, it is classified as such. If angels are the only investors, then a round is only marked as seed
if it is explicitly stated.
Early-stage: Rounds are generally classified as Series A or B (which PitchBook typically aggregates together
as early stage) either by the series of stock issued in the financing or, if that information is unavailable, by a
series of factors including: the age of the company, prior financing history, company status, participating
investors, and more.
Late-stage: Rounds are generally classified as Series C or D or later (which PitchBook typically aggregates
together as late stage) either by the series of stock issued in the financing or, if that information is unavailable, by
a series of factors including: the age of the company, prior financing history, company status, participating
investors, and more.
Growth equity: Rounds must include at least one investor tagged as growth/expansion, while deal size must either
be $15 million or more (although rounds of undisclosed size that meet all other criteria are included). In addition,
the deal must be classified as growth/expansion or later-stage VC in the PitchBook Platform. If the financing is
tagged as late-stage VC it is included regardless of industry. Also, if a company is tagged with any PitchBook
vertical, excepting manufacturing and infrastructure, it is kept. Otherwise, the following industries are excluded
from growth equity financing calculations: buildings and property, thrifts and mortgage finance, real estate
investment trusts, and oil & gas equipment, utilities, exploration, production and refining. Lastly, the company in
question must not have had an M&A event, buyout, or IPO completed prior to the round in question.
Corporate venture capital: Financings classified as corporate venture capital include rounds that saw both firms
investing via established CVC arms or corporations making equity investments off balance sheets or whatever
other non-CVC method actually employed.
Methodology (contd)
Exits
PitchBook includes the first majority liquidity event for holders of equity securities of venture-backed companies. This
includes events where there is a public market for the shares (IPO) or the acquisition of majority of the equity by another
entity (corporate or financial acquisition). This does not include secondary sales, further sales after the initial liquidity
event, or bankruptcies. M&A value is based on reported or disclosed figures, with no estimation used to assess the value
of transactions for which the actual deal size is unknown.
Fundraising
PitchBook defines venture capital funds as pools of capital raised for the purpose of investing in the equity of startup
companies. In addition to funds raised by traditional venture capital firms, PitchBook also includes funds raised by any
institution with the primary intent stated above. Funds identifying as growth-stage vehicles are classified as PE funds
and are not included in this report. A funds location is determined by the country in which the fund is domiciled, if that
information is not explicitly known, the headquarters country of the funds general partner is used. Only funds based in
the United States that have held their final close are included in the fundraising numbers. The entirety of a funds
committed capital is attributed to the year of the final close of the fund. Interim close amounts are not recorded in the year
of the interim close.
M&A
PitchBook defines M&A as a transaction in which one company purchases a controlling stake in another company. Eligible
transaction types include control acquisitions, leveraged buyouts (LBOs), corporate divestitures, reverse mergers, mergers
of equals, spin-offs, asset divestitures and asset acquisitions. Debt restructurings or any other liquidity, self-tender or
internal reorganizations are not included. More than 50% of the company must be acquired in the transaction. Minority
stake transactions (less than a 50% stake) are not included. Small business transactions are not included in this report.
Fintech
A portmanteau of finance and technology, the term refers to businesses who are using technology to operate outside of
traditional financial services business models to change how financial services are offered. Fintech also includes firms that
use technology to improve the competitive advantage of traditional financial services firms and the financial functions and
behaviors of consumers and enterprises alike.
1. Payments/Transactions companies whose business model revolves around using technology to provide the transfer
of value as a service and/or ANY company whose core business is predicated on distributed ledger (blockchain)
technology AND/OR relating to any use case of cryptocurrency (e.g. Bitcoin).
2. Lending Any non-bank who uses a technology platform to lend money often implementing alternative data and
analytics OR any company whose primary business involves providing data and analytics to online lenders or investors
in online loans.
3. Investment Banking/Capital Markets Companies whose primary business involves the types of financial intermediation
historically performed by investment banks.
4. Insurtech Companies whose primary business involves the novel use of technology in order to price, distribute, or
offer insurance directly.
5. Wealth/Investment Management Platforms whose primary business involves the offering of wealth management or
investment management services using technology to increase efficiency, lower fees or provide differentiated offerings
compared to the traditional business model. Also includes technology platforms for retail investors to share ideas and
insights both via quantitative and qualitative research.
6. Personal Finance Companies that provide a technology-driven service to improve retail customers' finances by
allowing them to monitor spending, savings, credit score or tax liability OR leveraging technology to offer basic retail
banking services such as checking or savings accounts outside of a traditional brick and mortar bank.
7. Institutional/B2B Fintech Companies that offer technology-driven solutions and services to enterprises or financial
institutions. These include software to automate financial processes, well financial security (excluding blockchain),
authentication as well as traditional and alternative data utilized by financial or other institutions and enterprises to make
strategic decisions.
8. Regtech Companies who provide a technology-driven service to facilitate and streamline compliance with regulations
and reporting as well as protect from employee and customer fraud.
To connect with a KPMG adviser in your region email
[email protected]
kpmg.com/fintechpulse
@kpmg
The information contained herein is of a general nature and is not intended to address
the circumstances of any particular individual or entity. Although we endeavor to
provide accurate and timely information, there can be no guarantee that such
information is accurate as of the date it is received or that it will continue to be
accurate in the future. No one should act on such information without appropriate
professional advice after a thorough examination of the particular situation.
2017 KPMG International Cooperative (KPMG International), a Swiss entity.

Member firms of the KPMG network of independent firms are affiliated with KPMG
International. KPMG International provides no client services. No member firm has any
authority to obligate or bind KPMG International or any other member firm vis--vis
third parties, nor does KPMG International have any such authority to obligate or bind
any member firm. All rights reserved.
The KPMG name and logo are registered trademarks or trademarks of KPMG
International.

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The Pulse

Large deals propel fintech market globally

Median deal size of early-stage deals grows

Insurtech is on course for record year of VC investment

Blockchain evolves beyond finite test cases

The rising tide of ICOs

Mature fintechs become laser-focused on extending customer value

Expanding number of fintech hubs

Trends to watch for globally

Deal Value ($B) # of Deals Closed

Capital Invested ($B) # of Deals Closed Angel/Seed Early VC Later VC

Deal value ($B) # of deals closed

Deal value ($B)

$1.0 $1.0 $1.4

2010 2011 2012 2013 2014 2015 2016 2017 YTD

Global median pre-money VC valuation ($M) by stage in fintech

18% Partially driven by the fact

Exit value ($B) Exit count

Global venture-backed exit activity by type ($B) in fintech

$3.0 Strategic Acquisition Buyout IPO

$326 $368 $1,122 $1,896 $1,797 $1,533

2012 2013 2014 2015 2016 2017 YTD (Q3)

Capital Invested ($M) # of Closed Deals

2013 2014 2015 2016 2017 YTD (Q3)

Capital Invested ($M) # of Closed Deals

Customer focus driving encroachment from ecommerce giants

Data-centric businesses apply pressure on other fronts

Partnerships offer banks opportunities for modernization

China exhibits possible model for the future of retail banking

$1.5 $5.4 $2.1 $2.6 $4.6 $1.4 $14.4 $0.1

2010 2011 2012 2013 2014 2015 2016 2017 YTD

$6.2 $8.1 $3.0 $5.1 $15.1 $20.1 $7.4 $7.0

2010 2011 2012 2013 2014 2015 2016 2017 YTD

1 Intacct $850M, San Jose, CA 6 Access Point Financial $350M, Atlanta

Fintech investment in Americas dominated by US megadeals

Fintech investment in Canada remains strong in Q317

Latin America continues to be ripe for fintech, particularly in Brazil

Mobile banking driving fintech activity in Mexico

Trends to watch for in the Americas

Deal Value ($B) # of Deals Closed

Capital Invested ($B) # of Deals Closed Angel/Seed Early VC Later VC

2010 2011 2012 2013 2014 2015 2016 2017 YTD

Deal Value ($B) Deal count

$2.5 $7.9 $3.2 $7.4 $11.1 $31.2 $10.1 $9.0

2010 2011 2012 2013 2014 2015 2016 2017 YTD

2010 2011 2012 2013 2014 2015 2016 2017 YTD

Median fintech venture pre-valuation ($M) by stage in the Americas

2010 2011 2012 2013 2014 2015 2016 2017 YTD

Capital invested ($B) % of total deal count

Fintech sectors maturing and broadening

M&A down significantly compared to the last 3 years

First-time financings for fintech companies in the US bucking global trends

Median deal size down dramatically for late-stage deals

Corporate investors focusing on partnerships

Regulatory fatigue driving regtech evolution

Trends to watch for in the US

Capital Invested ($B) # of Deals Closed Angel/Seed Early VC Later VC

2010 2011 2012 2013 2014 2015 2016 2017 YTD

159 The slow decline in global

$2.5 $7.9 $3.0 $7.3 $10.7 $31.0 $9.8 $4.8