The UK FinTech sector is attracting investment at a record rate, with $2.9bn raised in the first six months of 2019, research from industry body Innovate Finance has found. Growth comes despite Brexit fears and uncertainty engulfing the UK’s two major political parties.
Investment into UK FinTech startups this year was off to the quickest start compared to any calendar year, with the current total invested equivalent to nearly 85% of the total that was raised in 2018.
H1 2019 is off to the quickest start to any calendar year of investment in FinTech startups, overshadowing prior years by a significant margin, up just over 45% year-on-year and nearly double the inflows in the second half of 2018.
A significant majority came from later stage venture capital and private equity growth investment rounds which represented 85% of total investments made this year, with angel, seed and early venture capital rounds accounting for 15% of capital.
Deal volume has declined by 30% year-on-year, continuing a steady decrease that began at the start of 2018, but the value of individual deals has been much larger, a sign of the growing maturity of the UK FinTech sector.
Greensill Capital and OakNorth attracted the two largest deals made this year and are amongst the largest fundraises in the UK FinTech sector so far, with $880 million and $440 million respectively.
Challenger banks including OakNorth ($440m), Monzo ($147m) and Starling Bank ($98m) dominated the charts with the most significant investments. The payments and foreign exchange sectors also experienced large investments with companies such as Checkout.com ($230m), WorldRemit ($175m) and GoCardless ($76m) raising further rounds to support their growth.
While London based FinTech companies once again dominated investment flows (90%) there were significant raises by firms in other parts of the country, notably in the northern UK (Greater Manchester, Derbyshire and Newcastle). In terms of the number of deals, London FinTechs accounted for 78% while other parts of the UK made up 22%.
H1 2019 is off to the quickest start to any calendar year of investment in FinTech startups
Among the top 10 largest equity deals made so far this year are five Innovate Finance members: OakNorth, WorldRemit, Starling Bank, GoCardless and Onfido.
Commenting on the findings, Charlotte Crosswell, CEO of Innovate Finance, said:
“Investment into the UK FinTech sector shows no sign of slowing down. The flow and impressive size of individual investments demonstrate an ecosystem that is showing signs of growing maturity. This research underlines the UK’s position as a world leader in FinTech. It is hugely encouraging to see evidence of this resilience and growth despite the uncertainty and challenging times ahead. Both the flow of capital and a wide talent pool are essential to maintaining the sector’s strength, and we remain committed to support efforts in these vital areas.”
Tim Levene, CEO of Augmentum FinTech said:
“At Augmentum we are not surprised to see the Innovate Finance figures showing record investment into UK FinTech. This bears out what we are seeing – that the UK is attracting the lion’s share of European FinTech investment. The UK’s ecosystem is the deepest and most mature in Europe and we continue to attract the greatest concentration of talent compared to other major hubs. This has created a dynamic environment in the UK where we have both the talent to drive innovation alongside the deepest pool of funding.”
Keith Morgan, CEO of the British Business Bank said:
“FinTech is a hugely important sector for the UK economy, providing invaluable innovation in financial services and products. It’s therefore encouraging to see record volumes of investments being made in UK FinTech firms. At the British Business Bank, we have been strong advocates for the sector, having provided more than £450m of funding and investment to Fintech businesses through our programmes.