Fintech investment in U.S. soars in 2019

By Pete Settles

According to KPMG’s Pulse of Fintech H2’2019, fintech investment in the U.S. hit a record $59.8 billion last year, which includes investments in mergers and acquisitions (M&A), venture capital (VC) and private equity (PE).

Driving that growth was more competition in digital banking, growing investor interest in insurtech and an increased diversity of investment opportunities.

Diversity of Investments Driving Growth

The expansion of fintech beyond the traditional payments and lending spaces helped fuel investor interest in the U.S. In particular, there was growing interest in B2B-focused companies, insurtechs, and fintech-specific cybersecurity-related solutions.

 “The disruption we see across financial services is creating opportunities for fintechs across the board,” said Robert Ruark, KPMG’s Financial Services strategy and fintech leader in the U.S. “B2B focused fintechs are particularly attractive to investors given the large number of financial institutions looking for ways to improve their digital offerings and enhance customer experience to their small business and corporate clients.”

 

Cybersecurity is Hot

Given cybersecurity’s growing importance as threats get more sophisticated, it is likely to keep attracting investor interest in 2020.

“Traditionally, financial institutions, particularly the large banks, rolled out customized cybersecurity technologies on their own that don’t integrate with one-another,” said Charles Jacco, information protection and cybersecurity leader for KPMG’s Financial Services practice in the U.S.  “Now, we’re starting to see a big shift in mindset with the banks and other institutions buying product licenses and focusing more on integrating them together.”

Insurtech Gains Traction

U.S. investment in insurtech rose year over year, led by the $3.5 billion acquisition of US-based Assurance IQ by Prudential Financial in October 2019, and the Bright Health Series D financing of $635 million. Investors focused on later-stage companies, a reflection of the larger trend of VC investors preferring safer bets and proven companies. Partnership models are also growing in the insurtech space.

Heading into 2020, traditional insurers will likely increase their focus on how to work best with fintechs in order to achieve value. It is expected that there will be increasing investments in companies able to help insurers deal with big challenges, such as cybersecurity and regtech, or data analytics and data mining.

“Large carriers completed multiple proof of concepts and have seen the capabilities that exist in insurtech and realize that these solutions will have a large impact on their future,” said Gary Plotkin, global insurtech leader, KPMG International and principal, insurance management consulting leader, KPMG in the U.S. “They are starting to partner with them, acquire them, do joint ventures with them, and incorporate them into their businesses.”

If you would like to set up an interview with Gary Plotkin, Robert Ruark or Charles Jacco to discuss the report in more detail, please contact Pete Settles @pgsettles or psettles@kpmg.com.

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Pete Settles

Pete Settles

Director, Corp. Comm., Financial Services, KPMG US

+1 201-505-6065


Biographies

Gary Plotkin

Gary Plotkin

Principal, CIO Advisory, KPMG US

+1 617-988-1181
Bob Ruark

Bob Ruark

Principal, Banking & Fintech Strategy Leader, KPMG US

+1 704-371-5271
Charles A. Jacco

Charles A. Jacco

Principal, Cyber Security, KPMG US

+1 212-954-1949