Venture Capital Report in Internet Finance: Blockchain and Insurtech Show Growth Momentum

Baozou Comment : CB Insights and KPMG released a survey report on venture capital in the Internet finance sector in the second quarter of this year, finding that investment in the Internet finance sector showed a clear growth trend, with insurance technology, blockchain and robot investment advisors becoming the main driving forces for investment growth. At the same time, the report predicts that investment in the first two sub-sectors will continue to grow. The report also mentioned the change in attitude of traditional enterprises towards the emerging Internet finance industry in the second quarter, which shows that the upward trend of this industry has matured.

Translation: Annie_Xu

According to a survey report on venture capital in the Internet finance sector by CB Insights and KPMG, some sub-sectors in the Internet finance sector showed a clear growth trend last quarter, including insurtech, blockchain and robo-advisor. Insurtech and blockchain are the big winners this quarter, and the report further predicts that these two sub-sectors will continue to grow.

The second quarter of 2016 saw a noticeable increase in global interest in blockchain technology as many banks and financial institutions around the world began to focus on proof-of-concept initiatives and turn ideas into pilot tests of solutions.

Irene Chu

Irene Chu, Head of KPMG’s High Potential Technology and Innovation Group in Hong Kong, said:

"Many local Chinese financial institutions have begun to cooperate with Internet financial companies to explore artificial intelligence, biometrics and blockchain, and quickly build and test innovative products and services. We expect this trend to continue for some time."

Blockchain companies attracted several large rounds of investment in 2016. Specifically, there were 15 of the largest Internet finance venture capital deals in 2016, and blockchain startups received three of them. Circle Internet Financial received $60 million in financing in June to expand into the Chinese market; Digital Asset Holdings raised $60 million in January; and Blockstream raised $55 million in its Series A round.

The report analyzes innovation in the insurance industry and believes that the industry is ripe for change. Currently, many insurance technology companies (insurtech) have adopted cutting-edge technologies from other industries to develop and improve insurance products.

Some of them use the Internet of Things to provide risk identification and mitigation; others use blockchain and smart contract technology as a mechanism for accurate, efficient, and low-cost automatic dividend payments.

The report states:

"Although these activities are just beginning, many investors are looking forward to the opportunities that may arise in the future."

"It is expected that the application of blockchain, smart contracts, data analysis, Internet of Things and wearable devices will increase in the future; the former will provide customers with information sources, and the latter will improve the efficiency of insurance business."

According to Murray Raisbeck, UK insurance technology expert at KPMG, low consumer trust, fierce competition, low profit margins and challenges with traditional IT systems provide ample conditions for change in the insurance industry.

"Insurtech allows insurance companies to solve these problems through emerging technologies such as p2p, blockchain, IoT and SaaS."

This series of reports, called Pulse of Fintech Report, is dedicated to presenting detailed data and trend analysis of equity transactions conducted by global venture capital-backed Internet financial companies.

The report mentioned that although the venture capital obtained by Internet finance companies this quarter decreased significantly, with a total of US$2.5 billion obtained in 195 transactions; however, the amount of financing in 2016 has shown a trend of surpassing that of 2015.

North America continued to dominate venture capital transactions in the Internet finance market, with 97 transactions totaling US$1.3 billion; followed by Asia with 46 transactions totaling US$800 million; and Europe with 43 transactions totaling US$400 million.

Banks, financial institutions and insurance companies are finally beginning to view Internet finance companies not as disruptors and competitors, but as partners and supporters.

According to Arik Speier, Director of KPMG’s Enterprise Innovation Startups Networks and Head of Technology at KPMG Israel:

"Global cooperation in the field of Internet finance is taking place in different ways. We are witnessing a new mechanism, which is the combination of the cultivation of start-ups and internal research and development (from the perspective of banks and insurance companies)."

"Rather than chasing immediate returns, the company hopes to seek product partnerships and test the technology internally."