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Peer2Peer Finance News | November 21, 2017

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UK fintech funding rises as Brexit unease softens

UK fintech funding rises as Brexit unease softens
Emily Perryman

FINTECH funding in the UK was almost six times higher in the third quarter of 2017 than in the same quarter the year before, increasing from $120m (£91.3m) to $636m.

KPMG, which published the figures using data from PitchBook, said this suggests the unease around Brexit has softened.

But the quarter-on-quarter figures are less positive. Funding in the third quarter halved from more than $1.2bn of investment registered in the second quarter.

The research also shows Paris and London hosted 90 per cent of the deal value in France and the UK, respectively, but in Germany nearly half of the deal volume occurred outside Berlin.

Richard Gabbertas, head of financial services regions at KPMG UK, said London is the finance centre of the UK so it is only natural that it will attract a disproportionate amount of fintech activity.

He added that Edinburgh, Manchester and other regional cities are making huge strides in developing promising fintech centres.

“I hope that in the next few years we start to see more support from government, corporates and investors for our budding regional fintech hubs,” he said.

Read more: Germany, Italy, France and Russia ‘top targets for fintech firms’

The UK accounted for seven of Europe’s largest deals in the third quarter, including $100m-plus rounds to Prodigy Finance and Neyber.

The largest share of fintech investment in Europe came from Germany, buoyed by the $806m secondary buyout of ConCardis.

On a global basis, the US led fintech investment in the third quarter with $5bn deployed across 142 deals.

In contrast, Europe accounted for $1.66bn of investment across 73 deals while Asia accounted for $1.21bn across 41 deals.

Read more: London ‘will remain fintech hub of Europe post-Brexit’

Despite healthy investment activity, the volume of venture capital fintech deals dropped dramatically, particularly at the earlier deal stage.

The number of angel and seed stage fintech deals plummeted to 67, a low not seen since the first quarter of 2013. KPMG said this reflects a trend of investors focusing on larger deals and higher quality companies with proven business models.

Murray Raisbeck, global co-lead for KPMG Fintech, said the market is seeing the emergence of fintech leaders who are looking to expand internationally to scale their platforms, as well as large technology giants moving into adjacencies to create new value for their customers.

“This is a trend that is expected to continue and could force incumbent financial institutions to take bolder steps in response,” he added.

Read more: Record-breaking year for fintech investment