UK FinTech investment doubles to £2 billion
FinTech funding has continued to boom in the UK, with the country seeing investment in the sector at the start of 2019 almost doubling on the levels seen over the first six months of 2018. The global FinTech sector could be set to see falling interest, however, following declines in both volume and value.
As financial institutions look to tackle complex problems such as shifting consumer expectations, regulatory burdens and heightened competition from digital upstarts, many are turning to innovative FinTech platforms for their salvation. The threat and opportunities created by disruptive FinTech firms has not been lost on a whole host of actors – from consultancy firms to accelerators seeking to profit from the action – meaning investment in the segment has boomed continuously in recent years.
According to new research from Accenture, this trend is continuing in the UK in particular, with the country seeing investment in FinTechs nearly doubling to £2.15 billion ($2.6 billion) in the first half of 2019. The number of deals in the nation meanwhile increased by 25% to 263. Digital banking is driving this, with names like Monzo and Starling raising large funding rounds (£119 million and £174 million respectively), while the money transfer space saw stealth-bank Transferwise raise £241 million in May, and WorldRemit close on a £144 million funding round.
Julian Skan, a Senior Managing Director in Accenture’s Financial Services practice, commented, “There’s been a lot of interest and demand from consumers for new FinTech propositions, particularly in the U.K. and elsewhere in Europe, which helps explain the big jump in investments there. Fundraising is also moving to support the scaling up of challenger and collaborative FinTech... However, the question is: How long can that last? Fundraising is likely to reach a plateau soon and will most likely dip going forward.”
While the US similarly saw a leap in deal value of 60% to $12.7 billion, the UK seems to have bucked a general global trend. The total value of FinTech deals globally in the six months ended June 30th slumped to $22 billion, declining by 29% from the same period in 2018, when value hit $31.2 billion. According to Accenture, the global decline in FinTech funding during the first half of 2019 seems to have been driven by a major drop in China.
Accenture contended that China’s decline was due to an abundance of success in 2018 throwing its numbers out of proportion. Ant Financial’s huge $14 billion funding round in early 2018 boosted global funding considerably last year, but if the figures from last year take this into account, FinTech funding looks much healthier. In that case, global FinTech funding in the first half of 2019 would have risen by 28%, indicating significant growth.
With that being said, it would be naïve to write off the potential for FinTech’s bubble to burst in the near future. While the digitalisation of finance is often taken as a given in the long-term, a number of potential cataclysms seem to be looming large on the financial sector’s horizon. Talk of trade wars between the US and China are escalating, while the impact of Brexit on either sides of the Channel could also throw European markets into chaos. With all this seemingly compounding the likelihood of a recession in the coming months, the willingness of investors to sink capital into FinTechs looks set to be tested to the maximum.
Echoing this, while CBInsights’ quarterly FinTech report – released around the same time as Accenture’s, and based on the same data – suggested funding in some regions moved higher at the start of 2019, the analysts similarly found cause for concern. The number of venture capital-backed FinTech deals in particular fell to its lowest number since Q4 of 2016.
