INVESTMENT in UK fintech reached a record high of $20.7bn (£16bn) in 2018, despite a lower number of deals and a slowdown in the second half of the year.
In its biannual Pulse of Fintech report, KPMG reported that total fintech investment in the UK was almost four times higher in 2018 than it was in 2017. Furthermore, half of the top 10 European fintech deals took place in the UK, cementing its status as the fintech capital of Europe.
However, almost half of 2018’s investment value came from just one deal – the acquisition of WorldPay for $12.8bn in the first half of the year.
Between July and December 2018, UK investment dropped to just $1bn, compared to $2.8bn during the same period the previous year.
“Despite activity tailing off in the second half of the year, the UK fintech sector reached record highs with an exceptionally strong 2018,” said Anton Ruddenklau, global co-lead at KPMG Fintech.
“Fintech investment trends can be relatively agile, but it remains to be seen if the drop in activity in the second half is due to Brexit uncertainties or the start of a wider trend, possibly the end of this fintech cycle as the next generation starts to emerge. We have seen a noticeable squeeze earlier in the funding cycle as investors focused on more secure bets.
“Overall we expect fintech levels to remain robust in 2019 in part due to further consolidation from companies looking to increase scale.”
Read more: UK increases presence on KPMG Fintech100
Fintech investments also reached record levels at a global scale, with $111.8bn entering the sector, more than double the $50.8bn that was invested in 2017, fuelled largely by M&A and buyout deals.
Three 2018 deals were worth more than $10bn each. As well as the $12.8bn Worldpay deal, Alibaba subsidiary Ant Financial raised $14bn through venture capital investments, while financial software firm Refinitiv received record-breaking investments worth $17bn.
“The growing deal sizes, higher levels of M&A activity and the geographic spread of deals all highlight the increasing maturation of the fintech sector on a global scale,” said
Ian Pollari, global co-lead, KPMG Fintech.
“Fintech start-ups in markets as diverse as Germany and Brazil are attracting larger and later stage rounds, while the more established fintech leaders in the US, UK, and Asia are making their own investments and acquisitions in order to expand their product and geographic reach.”
KPMG’s latest report follows yesterday’s news that private investment in UK fintech also reached record levels last year. Industry body Innovate Finance reported that $3.3bn was invested by venture capitalists and private equity firms in 2018, an 18 per cent year-on-year increase.
KPMG predicted that 2019 will see more consolidation in the global fintech sector, particularly in mature areas such as payments and lending. Open Banking and regtech investments are also expected to rise, while traditional banks are likely to embrace digital banking.