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Peer2Peer Finance News | December 13, 2017

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VCs invest less money in UK fintech in 2016 but ink more deals

VCs invest less money in UK fintech in 2016 but ink more deals
Suzie Neuwirth

LESS MONEY was invested into UK fintech start-ups in 2016, but there were more deals than 2015, according to new research.

Venture capitalists made 96 deals in the sector last year, up from 93 deals in 2015, according to KPMG’s pulse of fintech report for the fourth quarter of 2016.

However, the volume of VC investment dropped by about a third from $957m (£771m) to $609m year on year.

Overall investment in UK fintech companies fell by more than 85 per cent from $4.6bn in 2015 to $654m in 2016. However, the volume of deals remained healthy with 124 completed during the period.  

“London is seen as one of the truly global financial centres which, along with a vibrant tech startup sector, has helped create a strong environment for fintech firms to start up and scale,” said the report.

“Venture capitalists continue to show a strong interest in the sector and plenty of fintech businesses have been able to raise significant sums. Questions do still remain, however, following the 2016 Brexit vote, particularly regarding access to talent and EU passporting.”

Read more: UK fintech investment falls amid Brexit concerns          

Read more: Funding Circle announces £82m equity investment after record quarter         

The study also highlighted the UK’s efforts to promote its fintech sector across the world.

“The UK government and regulator are committed to supporting and promoting the fintech sector,” said Patrick Imbach, head of KPMG tech growth. “As well as launching the world’s first regulatory sandbox, the Financial Conduct Authority has created fintech bridges with Australia, Singapore, Korea and China to strengthen regulatory collaboration and help fintechs scale internationally.”

Read more: New UK fintech conference to address funding gap

Read more: RateSetter and Crowd2Fund join City minister on Singapore trade mission          

Meanwhile, total investment into fintech globally slumped by almost 50 per cent last year. Total fintech funding declined to $25bn, which KPMG attributed to uncertainty surrounding Brexit, the US presidential election, a slowdown in China and exchange rate fluctuations.

Read more: MarketInvoice and Funding Circle represent P2P on fintech delivery panel          

In Europe, total fintech investment declined from $10.9bn to $2.2bn year on year, although venture capital funding ticked up from $1.2bn to $1.4bn over the period.

“There was a big rush of investment in fintech during 2014 and 2015 as investors globally bought into the idea of new and disruptive business models,” said Warren Mead, global co-leader of fintech at KPMG.

“Amid growing geopolitical and macro-economic uncertainty, 2016, saw the investor sentiment tide turn, with investors seeming to want more proof that innovative solutions can be scaled and commercialised.”