Even in the US, the indications are similar trends exist. Again, 2015 was a record year with $US60 billion of investment and nearly 4,500 deals but the first quarter of 2016 delivered only $US12 billion spread across 600 odd deals.
In the NVCA data, two things leap out: fintech is small with financial services well behind software, biotech, computers and peripherals, media and entertainment and even industrials. And Silicon Valley, while still far and away the hotbed, is seeing increasing competition from New England, New York City and the “south east”.
So a slowing market, tighter funding, more focus on returns – a not dissimilar environment to the one traditional financial services companies are facing.
But for those still carrying a torch for the fintech revolution, Asia is the most fascinating region as it is for economic optimists more generally – even with the uncertainty around geopolitics and China.
ALIVE WITH ACTIVITY
The highly regarded financial technology commentator Chris Skinner, on his blog Finanser.com, has published an extremely thorough rundown of fintech in Asia and he emphasises the point while China has dominated in recent times, and is the home to some of the biggest names, the rest of Asia, from the developed north to the emerging south east, is alive with activity.
“Asian Fintech is all about new ideas and new models,” Skinner says. “There are incumbent led changes too – remember Frank from OCBC and Breeze from Standard Chartered? – but it’s not the same as what we see in Europe and the US.
“For example, there is a massive population in Asia that is unbanked, and mobile smartphone developments are creating new models of financial inclusion, especially in the Philippines and Indonesia. Equally, it’s a region that has seen the rise of the new middle class, with millions of consumers gaining disposable income to afford aspirational products and buying much of it online.”
For developed Asia, like Japan, Korea and Taiwan, the promise of fintech is the erosion of margins in markets long resistant to foreign competition.
The latest data though reminds us venture capital and start-up funding are not immune to normal market forces. Whether there was a bubble or not, the appetite for fintech in particular had surged over 2014 and 2015. It is now settling down – as the much deeper market for non-fintech start-ups slows as well.
Interestingly, this is occurring at a time when incumbents are becoming less averse to the idea of teaming up with disruptors, whether by partnership, outright purchase or something in between. It will be a period to test the diehard start-up revolutionaries who have vowed never to join the ancien regime.
Andrew Cornell is managing editor at BlueNotes
You can read more on the Asian startup opportunity in Startups, go north