By Citi GPS, Global Perspectives & Solutions
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What FinTech VC investments tell us about a changing industry
2016 was the year when the Chinese FinTech dragons roared and some previously feted Western FinTech leaders wilted. In our first Digital Disruption GPS report, we argued that China was very important to the FinTech story (March 2016, link here). In this follow-on report, we follow the venture capital (VC) and corporate investments money trail to revisit the theme of the Chinese FinTech dragons as they roar at home and expand overseas.
Our conclusion: the rise of the Chinese dragons reflects a unique combination over the past decade of incredibly rapid digitization and the simultaneous rise of the Chinese mass middle class, along with poorly prepared incumbent financial institutions facing off against entrepreneurial e-commerce and social media ecosystems. It is no surprise to us that China accounted for over 50% of total FinTech investments globally in the first nine months of 2016 (9M 2016) and was the only major region where FinTech investments increased in 2016 — in fact doubling in China in the first nine months of 2016 versus the same period in 2015.
In this report we also take a look at how different the FinTech evolution has been in the West: (1) the U.S. pivoted to InsurTech in 2016; and (2) two of the largest U.S. FinTech VC funding rounds in 2016 were in the health insurance space. Big data, the Internet of Things (Iota), and wearable devices, among other trends, will help insurance companies use FinTech to be more creative and customized. So far the InsurTech focus is more about improving distribution efficiency and user experience, as with much B2C FinTech in general.