UK fintech investment reaches record $3.3bn

It was another good year for UK fintech as investment rose by 18% to a record $3.3 billion in 2018.

Challenger banks took the lion’s share of VC investment

According to a report from industry body Innovate Finance, growth private equity investment rose 57% to $1.6 billion, while venture capital (VC) dipped to $1.7 billion as the UK fintech sector enters a “new stage of its growth journey, ahead of its peers in Europe”.

The UK ranked third globally behind China and the US. Within Europe, the UK continues to dominate followed by Germany ($716 million and 48 deals) and Switzerland ($328 million and 40 deals).

Charlotte Crosswell, CEO of Innovate Finance, says: “The UK has a unique position across financial services, technological innovation, regulators and government which all play a crucial role in this impressive growth journey. However, we should not be complacent as new challenges lie ahead; we must focus on growing our talent and capital pipeline across the UK, to ensure sustainable and inclusive growth in the future.”

Revolut’s $250 million fundraise ranked among the top ten largest global VC deals of 2018. Monzo, EToro, Liberis and BitFury were also among the UK’s top five deals, each raising over $80 million.

Challenger banks took the lion’s share of VC investment at 27% of the total, followed by personal finance and wealth management (19%), alternative lending and financing (18%) and blockchain and digital currencies (10%).

The UK remains a “competitive” investment destination with 50% of investment flowing in from overseas, largely from North America (25%) and Europe (18%).

Just 6% of deals had a female founder, representing only 3% of the total capital invested in 2018. Everyone keeps saying more needs to done but not a lot changes.

London continues to be the “preeminent centre” for fintech in the UK, with over 80% of start-ups receiving VC headquartered in the litter-strewn, knife-loving city – claiming over 90% of capital invested.

If you want a comparison, then in its previous report, Innovate Finance revealed VC investment in the nation’s fintech firms was up 153% at $1.8 billion in 2017.

It was not all about the UK, as Innovate Finance notes that global VC investment in fintech in 2018 reached a record $36.6 billion, a jump of 148% from 2017 and 329% over five years.

China’s Ant Financial dominated 2018 with $14 billion raised – representing 38% of all VC in our sector. JD Digits ($1.9 billion – China), Dataminr ($392 million – US), Oscar ($375 million – US) and Robinhood ($363 million – US) were also among the top deals of 2018.

Accenture’s angle

There was another view on the UK scene.

In 2018, the UK “continued to outpace the rest of Europe in fintech investment”, accounting for over half (56%) of the total $6.9 billion invested across the region, according to Accenture analysis of data from CB Insights.

UK investments in 2018 rose from $2.5 billion in 2017 to $3.9 billion last year. The nation had 339 deals in 2018, compared to 272 in 2017.

Germany came in second with 70 deals ($845 million) in 2019, compared to 87 ($2.2 billion) in 2017.