Funding for financial technology companies in the UK saw a dramatic slow-down throughout the middle part of 2016, probably in light of the Brexit referendum result. However, final figures for the year paint a much more promising picture. FinTech investment increased by 122% between October and December, with a 33% rise in the number of deals. While the final quarter investment figure of £138.5 million ($173 million) over 16 deals is still far lower than the same quarter in 2015 ($275 million), the rapid rise means a promising start for 2017. Investors such as Henner Diekmann of Diekmann Associates will be feeling more confident about the short-term future of the financial technology sector, especially given the global predictions from both KPMG and Pitchbook forecasting a bumper 2017.
FinTech Earmarked as Key Growth Area
The figures for the fourth quarter of 2016 will have come as good news to the post-Brexit government, which has already stated that FinTech has been earmarked as a key growth area for the UK. Other key growth sectors include Islamic finance and green finance. Chancellor Philip Hammond was quoted as saying that the UK was a “global FinTech capital” following the latest £30 million round of funding for Nutmeg.
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Global FinTech Funding 2015 – 2016
On a global level, funding for FinTech companies dropped by almost 50% year-on-year, from $47 billion in 2015 to just $25 billion in 2016. Looking at Europe separately, funding in the sector fell by around 80%, with just $2.2 billion raised in 2016 compared to $10.9 billion in 2015. The US tied in with the global average of around a 50% decline, from $27 billion down to $12.8 billion, while in the UK deal value went down from $4.6 billion in 2015 to just $465 million in 2016. The transaction volume in the UK did remain steady however, whereas in the US the total number of deals dropped from 615 to 489 in an atmosphere of regulatory and political uncertainty.
FinTech Forecast 2017
Despite the plummeting funding throughout 2016, a bullish report has been issued by KPMG and PitchBook for the 2017 forecast. Co-Leader of KPMG Brian Hughes stated that he believed 2017 would be a pivotal year for the US and the rest of the world in terms of funding for FinTech. KPMG further stated that the vibrant tech start-up sector in London means it will continue to be seen as one of the true global centres for finance. In wider Europe PSD2 was highlighted as a game-changer, while in the US and across the world the rise of new technologies such as the Internet of Things, AI and blockchain, combined with insurtech, resulted in a promising outlook for the coming year. Asia, and in particular China, was one area of the globe that remained steady from 2015 to 2016, in fact reaching a new record high with funding of $8.6 billion. This compares to $8.4 billion in 2015 and was largely comprised of three mega-deals.
In the post to follow you can find out more about FinTech start-ups in the UK that are billed to be the hottest tickets in 2017.
