Fintech funding in developing economies, especially in China and India, is rising steeply. Insurers throughout the world will benefit from this trend.
The status of the U.S. as the driving force of developments in financial services technology, fintech, is beginning to wane. Start-ups elsewhere in the world are increasingly attracting big funders. This is a sure sign of the globalization of the fintech industry.
The spread of fintech investment is being driven by the strong economic growth anticipated in major developing economies, particularly China and India, as well as the rollout of extensive technology infrastructure in these regions. A further spur is the rising demand for specialized financial services, including insurance offerings, tailored to meet local needs.
U.S. fintech hubs in Silicon Valley, New York and Austin continued to attract strong support during 2015, as did their European counterparts in cities such as London and Stockholm. However, fintech innovation centers in Beijing, Hong Kong, Mumbai and Bangalore, as well as in the Japanese capital Tokyo, enjoyed substantial investor support.
Fintech investment in the Asia-Pacific region increased four-fold last year to US$4.3 billion. It's set to continue rising steeply. More than half of all fintech investment in the first quarter of this year went to Asia-Pacific companies.
China attracted the bulk of fintech investment in the Asia-Pacific region last year, 45 percent, with India garnering 38 percent. Most of the deals, 78 percent, addressed the banking industry. Only 1 percent targeted the insurance sector.
The U.S. continues to dominate the $2.6 billion insurance technology, insurtech, industry. Most of the 45 insurtech investment deals concluded in the first quarter of 2016 went to U.S. firms, according to researcher CB Insights. However, investment outside the U.S. is likely to accelerate as the insurtech industry matures. Expect funding patterns to follow the example of more established fintech sectors, such as retail banking and payments, and to gravitate more to developing economies, especially in the Asia-Pacific region.
Greater globalization of the insurtech industry will be good news for insurers – especially global insurers. It will increase venture investment opportunities for big carriers, accelerate the development of new insurance solutions and increase the availability of localized products and services.
Now, while the insurtech industry is still young, is a good time for insurers to look around the world for attractive partners.
In my next blog post I'll discuss how insurers, and other financial services firms, can best respond to the fintech boom.
Meanwhile, take some time to have a look at this link. I'm sure you'll find it interesting.