With the UK’s Fintech sector continuing to draw record-levels of investment, the future is bright. Despite challenges brought on by Brexit uncertainty, Fintech looks set to weather the storm and continue to grow.
This cements its importance to the UK’s economy, and gives grounds for optimism during increasingly fraught times.
Record level of Fintech investment
Industry body Innovate Finance released data showing an investment level of $2.9 billion for the first half of 2019. Start-ups are attracting both the fastest investment, and the highest levels. The total funding raised by the sector during the first half of 2019 is already equivalent to 85% of 2018’s total.
The speed of investment into UK Fintech start-ups beats previous years by a decent margin. And this data is also significant in the context of the uncertainty caused by Brexit. The Fintech sector is not only remaining robust but is continuing to grow. All signs point towards Fintech weathering the storm caused by Brexit and remaining a positive oasis in a business sector beset by concerns over its future.
By the end of 2018, total Fintech investment reached $3.3 billion. It seems that 2019 is on course to beat this and set a new record. And while the number of deals is continuing to fall, the value of individual deals is growing.
Fintech deals are down in volume but up in value
During the first half of 2019, there were 123 deals within the sector, totalling an investment of $2.9 billion. This shows the sheer size of the deals, and their importance on a global scale.
The two biggest Fintech deals of 2019 so far are investment of $880 million in Greensill Capital and $440 million into challenger bank OakNorth Bank. OakNorth is based in London and offers property and business loans to the SME sector, as well as a range of other banking services. Founded in 2015, it has utilised innovative technology including Amazon Web Services to become the first bank to host its core system entirely on the cloud. As of 2018, its pre-tax profits totalled £33.9 million.
Challenger banks attracting bulk of investment
Challenger banks are amassing a significant percentage of the investment. Monzo has raised $147 million and Starling Bank $98 million. Other sectors that are benefitting include payment services and foreign exchange transferral services.
Most of the investment (85%) is also going to later stage funding rounds, with 15% reserved for seed, angel and start-up funding. All of which points towards a sector that is finding its feet and maturing.
Online payment platform Checkout.com has raised $230 million in 2019. The platform has been around since 2012 and has grown into a major provider of international online payment solutions. Another money transfer platform, WorldRemit, is also in later stages of funding. It was founded in 2010, and has received funding throughout various rounds, culminating in the $175 million this year.
Fintech’s future is bright in the UK
The flow of investment is mostly heading to Fintech companies operating from London, but there is a rise in investment in regions too. Investment is significantly higher in cities like Greater Manchester and Newcastle Upon Tyne. Deals are split with 78% in London and 22% in regional areas. We can expect to see regional deals increasing over the next few years as the sector diversifies away from London-centric start-ups.
Fintech is a massively important sector for the UK’s economy. It’s encouraging to see that its growth appears unhindered by the vagaries of the Brexit negotiations. We can expect to see investment increase as the UK continues to lead Europe in this important sector.