In January 2017, leading financial giant Citi published a new report called Digital Disruption – Revisited: what fintech VC investments tell us about a changing industry, which follows up on a May 2016 report detailing the rise & importance of the Chinese fintech ecosystem.
The year 2016 was the year that Chinese fintech dragons reared their heads, while some previously feted Western fintech leaders fell by the wayside. In its original Digital Disruption GPS (Global Perspectives & Solutions) report, first published March 2016, Citi aimed to highlight the important role of China in the fintech story. Now, in this follow-up report Citi GPS follows the trail of venture capital (VC) & corporate investments, revisiting the theme of Chinese fintech dragons as they continue to grow and expand oversees.
The key conclusion drawn in the report was that, “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 therefore not surprising to learn that China accounted for more than 50% of all investments globally in the first nine months of 2016 (9M 2016). In addition, China was the only major region of the world that saw significant increase in investments in 2016. In fact, in the first nine months of 2016, China managed to double its investments compared to the same period in 2015.
In this most recent Citi GPS report, the authors also set out to compare the differences in the fintech evolution in the West, that is: (1) the U.S. pivot 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 (IoT), and wearable devices, among other trends, are expected to help insurance companies employ fintech solutions to be more creative and customized. So far the InsurTech focus has been more toward improving distribution efficiency and user experience, as with much of the B2C fintech world in general.
The second half of the report is dedicated to highlighting eight leading fintech VC firms from around the world or in other key fintech industry hotspot area. Nominees were invited to nominate their favourite business models, with results showing that:
- Payments, especially e-commerce payments, could potentially reap large economy of scale
- Lending is still popular especially in emerging markets
- Shifting interest toward B2B business models in developed markets
- InsurTech is gaining momentum in North America.
To read or download the complete Digital Disruption – Revisited report by Citi GPS Report, click here.