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Reuters/Brendan McDermid
Funding to fintech startups fell last quarter. A lot.
DRYING UP

Funding to fintech startups took a big hit last quarter

By Ian Kar

Funds aren’t flowing so easily to fintech startups anymore.

Funding into the sector fell 49% globally in the second quarter of 2016 from the first quarter of the year, according to a new report from research firm CBInsights and KPMG. Global funding—from venture capital firms and corporates—fell 51% compared to the second quarter of 2015.

Does that mean that Silicon Valley’s obsession with using tech to rewrite finance is over? Probably not.

Relatively untouched areas like insurance are still attracting big dollars—insurance tech raised over $1 billion in the first two quarters of 2016. But as banks hone their tech strategies, many in the industry are realizing they don’t need startups to build products. JPMorgan Chase has started initiatives in mobile payments, blockchain technology, and has partnered with alternative lending company OnDeck for small business loans. Citi has an entire division devoted to fintech. Goldman Sachs is developing digital consumer lending from within. That could be why the share of funding into fintech startups coming from corporates, which includes financial institutions and their venture divisions, fell to 68% in the second quarter of 2016, its lowest point over the past five quarters.

CBInsights remains bullish on fintech investing for the remainder of the year, however. Despite the second quarter drop, it expects investments in financial technology startups will surpass last year’s total of $14.5 billion.

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