Overall global investment for financial technology (FinTech) increased by 27 % to $15.2 billion to Q3 2016 with 839 deals in total according to statistics compiled through Pitchbook by Innovate Finance, the not-for-profit membership association for global FinTech. This level of funding has already surpassed the 2015 total of $14.9 billion.
While total global investment soared, UK VC investment for FinTech firms decreased by 26% to Q3 2016 to $532 million and is approximately half of the total 2015 investment of $1.1 billion.
China outpaced the US for the first time in deal value while the US saw the highest deal volume with 10 of the top 20 global deals.
The top three global FinTech deals came from China, with Alipay, Lufax and JD Finance leading the charge and raising over $6.7 billion collectively. InsurTech firm Oscar led the US rounds, attracting the most funding at $400 million. The UK attracted 76 deals this year, the highest volume outside the US at 457, and remained third place behind the US and China in terms of total FinTech investment, which valued $532 million. Of the top 20 global deals, only one company was from the UK – Starling Bank, which secured $101 million in funding.
Over 60% of the UK VC investment in FinTech in 2016 was in challenger banks, SME financing and money transfer, FX, distributed ledger and digital currency verticals. Eight of the top 20 UK deals closed post Brexit totalling $105m. 64% of the UK deals in Q3 were follow-on investment rounds and 67% of UK investments for this period were by UK domiciled funds.
Starling Bank, SETL, Tandem Bank, Sonovate and Ezbob rounded up the top 5 FinTech deals in the UK, all over $25m in size of investment. The following seven Innovate Finance members made the list of top 20 UK investments: Transferwise ($26m), LendInvest ($25m), Property Partner ($22.6), Azimo ($13.4), GoCardless ($13.0), Crowdcube ($10.5m) and Neyber ($8.7m).
Commenting on the findings, Lawrence Wintermeyer, CEO of Innovate Finance said: “While the UK still attracted a high number of deals for FinTech there’s been a significant drop in investment year on year to Q3 2016, possibly due to the referendum result on Brexit and the future uncertainty of the relationship between European markets and the financial services sector. The UK government needs to be bold and use the tools it has at its disposal such as the British Business Bank to support the sector. This will become increasingly important with the potential loss of EU funds such as the EIF.”
Wintermeyer added: “While Brexit uncertainty may continue to have an impact on investor behavior, remaining attractive to international talent is just as important to maintaining the UK’s current position as the world’s premier FinTech hub. Ahead of the Autumn Statement Innovate Finance urges the Chancellor to ensure the UK continues to drive investment and innovation, attract talent and maintain an open trading relationship with the EU and globally.“
Read Innovate Finance’s Autumn Statement Recommendations to government for UK FinTech here.