UK fintech soars despite global investment slowdown
MORE THAN $3bn (£2.47bn) was invested into UK-based fintechs in the first half of 2019, despite a huge drop in global fintech funding.
According to KPMG’s latest Pulse of Fintech report, just $37.6bn was invested in global fintech firms in the first six months of the year, down from $62.6bn in the first half of 2018.
However, the UK’s fintech sector bucked this trend by raising $3.06bn in new funding from venture capital firms and private equity investments, and seeing $3.9bn worth of investment activity overall.
“We are set for 2019 to be another record year for the UK fintech sector,” said Anton Ruddenklau, UK head of fintech at KPMG. “We have already seen $3.06bn of new funding from VC and PE that compares to only $3.42bn for the whole of 2018.
“Whilst the first half of 2018 saw some blockbuster M&A deals in the UK, M&A is set for a boost in the remainder of 2019 when the next acquisition of WorldPay closes. This could even see the UK overtake China in overall fintech investment activity.
“But, the UK cannot rest on its laurels, there was a reduction in angel and seed VC investment which the sector needs to focus on supporting in order to foster the next generation of fintechs.”
The UK fintech sector accounted for six of the top 10 deals in Europe, and UK businesses won 68 per cent of the overall venture capital and private equity investment in Europe during the first half of the year. France, Argentina, Canada, China, Germany, and the United States also saw some growth in fintech investments and deal-making activity.
“The introduction of open banking is emerging as a significant driver of fintech investment, along with the opportunities presented by technologies like machine learning and AI,” said Ian Pollari, global fintech co-leader, KPMG International.
“We’re seeing the growth of sectors like wealthtech and proptech, in addition to increasing participation from the big tech companies looking to leverage the deep customer information they have to expand their reach into financial services.”
On a global scale, declining interest in the blockchain and cryptocurrency space and a dramatic drop in insurtech investment led to a huge reduction in the amount of funding. In 2018, global fintech investment was worth $120bn, but in the first half of 2019, just $37.9bn had been raised. However, KPMG added that this decline might be short-lived given the “massive M&A deals on the horizon”.
US-based fintechs accounted for half of this global investment, with $18.3bn raised acoss 470 deals in the first six months of the year. Meanwhile, Brazil achieved a record high of $500.1m invested across 31 deals, and Canada raised more than $1.55bn between April and June alone.
Total investment in European fintechs reached $13.2bn over this time period, roughly in line with the previous year’s figures.
However, Asia-based fintechs saw a dramatic decline, with just $3.6bn raised in the first half of the year, after a record $25.5bn across the whole of 2018.