VENTURE capital investments in the UK’s fintech sector were up by 37 per cent in the first half of 2017, fuelled in part by multi-million-pound deals with Funding Circle, Zopa and Atom Bank.
According to new research from trade body Innovate Finance, more than $564m (£432.8m) was invested in UK-based fintech firms between 1 January and 30 June 2017, a significant increase year on year. However, volumes are still lower than the inflows for the first half of 2015.
Globally, $6.5bn was invested in fintech start-ups in the first half of 2017, a 45 per cent decrease year on year. However, Innovate Finance pointed out that this data has been skewed by the mega-deals which took place in China in the first half of 2016.
“The investment data for the first half of 2017 shows that global fintech investment is down versus the same period in 2016,” said Abdul Haseeb Basit, chief finance officer of Innovate Finance.
“However, if you adjust for the exceptional mega-deals in China in the first half of 2016, where three companies, Alipay, Lufax and JD Finance, raised over $1bn each, we see that global investment has gone up 28.4 per cent. The sector continues to thrive.”
The top five UK deals were Atom Bank, Funding Circle, Zopa, Monzo and Currency Cloud, with Atom Bank and Funding Circle ranking in the global top 20 deal list. Atom Bank secured $102m in funding earlier this year, while Funding Circle raised $101m and Zopa raised $41m.
More than a quarter (28 per cent) of UK investment in fintech was in alternative lending.
This places the UK third in the world for fintech investment, behind the US and China. The US came in first place, with $3.3bn invested across 357 deals.
Basit called for the UK government to continue its support for the sector amid Brexit uncertainty.
“Despite the uncertainties of Brexit, the UK retains its position as a leading fintech hub and has attracted more investment in first half of 2017 than the same period last year,” he said. “These investment figures are lower than the first half of 2015, signalling a slow return to pre-Brexit funding levels.
“The UK government needs to continue its support for the sector, by ensuring the country remains attractive to talent and investment, while also maintaining an open trading relationship with Europe and the rest of the world.”
According to the Innovate Finance research, the most active global investors were 500 Startups, Startupbootcamp and Y Combinator, which each made 17 investments each.