The UK’s fintech industry attracted over $16bn investment in the first half of 2018, more than any other country.
The UK’s fintech industry attracted over $16bn investment in the first half of 2018, more than any other country. This was in large part due to Vantiv’s acquisition of WorldPay for $12.9bn. The UK accounted for over half the total fintech investment into Europe ($26bn) and attracted more money than the US ($14bn).
Despite some concerns about Brexit, venture capital investors remained bullish on UK fintech with four of Europe’s top 10 deals happening here: a $250m raise by Revolut, a $100m raise by eToro, a $60m raise by Flender and a $54m raise by MoneyFarm.
Globally, fintech investment roared ahead at a record pace in the first half of the year, with $57.9bn invested across 875 deals, a significant increase from the $38.1bn invested in all of 2017.
Anton Ruddenklau, Global Co-Lead, KPMG Fintech, said: “The year has got off to an exceptionally strong start for the fintech sector. In addition to the bullish levels of investment the UK has attracted, our fintech sector has also benefitted from the government’s continued support with the launch of the Fintech Sector Strategy.
“Fintech investment is always fairly volatile but the UK tends to enjoy higher highs and lower lows than most, the blockbuster acquisition of WorldPay by Vantiv certainly means H1 2018 was a real high for UK fintech investment. Whilst the rest of the year will struggle to replicate the first half, I’m optimistic that we will remain in robust shape.”
“Large deals at all stages of investment powered fintech investment in the first half of 2018,” adds Ian Pollari, Global Co-Lead, KPMG Fintech. “But just as notable is the breadth of investment. We’re seeing a mix of fintech sub-sectors drawing increasing interest, including data, AI and regtech — these horizontal capabilities have appeal across the full spectrum of the financial services industry.”
H1’18 key highlights
· Global fintech investment (PE, VC and M&A) more than doubled – from $22bn in the second half of 2017 to a new high of $57.9bn in H1’18, buoyed by nine $1bn+ megadeals.
· Europe’s top four fintech deals accounted for $22.4bn in investment, including the $12.9bn acquisition of
· WorldPay by UK-based Vantiv.
· In H1’18, investment in fintech companies in Asia hit $16.8bn across 162 deals, an increase from 119 deals in H2’17.
· Fintech VC volume has remained relatively steady since the start of 2015 – rising slightly to 653 deals in H1’18.
· Median late stage VC deal size within the fintech sector rose dramatically - from $14m in 2017 to $25m in H1’18.
US-based fintechs see surge in VC funding, surpassing $5bn in H1’18
In H1’18, US fintech companies attracted $14.2bn in investment, including over $5bn in VC investment. VC deal volume continued its upward trend, moving from 276 deals in H2’17 to 328 deals in H1’18, driven in large part by resurgent angel, seed and early stage VC deals. Investors were quick to invest in new startups in emerging fintech sub-segments, including regtech and investment banking, while continuing to pour money into mature, late-stage companies such as Robinhood – whose $363m was one of the largest VC deals in the first half of 2018.
Top four deals in Europe total $22bn
Total investment in fintech companies in Europe hit $26bn across 198 deals in H1’18, fueled by substantial deals by WorldPay, Nets, iZettle and IRIS software – which together accounted for $22.4bn of the European total. However, while deal value achieved a new peak in Europe, deal volume declined, falling from 268 in H2’17 to 198 in H1’18.
The UK led the way in European fintech investment, with $16.1bn and five of the top 10 deals in the region, despite possible concerns around Brexit negotiations. Scandinavia’s growing fintech ecosystem was also well represented, with the buyouts of Nets (Denmark), iZettle (Sweden) and Nordax Group (Sweden) among the top ten deals in H1’18.
Asian fintech reaches $16.8bn – on strength of Ant Financial deal
After a solid US$2B in H2’17, total fintech funding in Asia surged to US$16.8B across 162 deals in H1’18 powered by a massive US$14B Series C VC funding round by Ant Financial. Excluding this mega-deal, Asia still saw strong fintech investment, including quarter-over-quarter increases in overall fintech investment in India, Australia, and Singapore.
Following a global trend, median fintech VC late stage deal size in Asia increased significantly during the first half of the year – rising from US$25M to US$37.7M – the highest of any region. Blockchain and AI continued to be key priority areas for fintech investors in Asia, in addition to insurtech and regtech.
Payments and regtech subsectors shine
As one of the most mature sub-sectors of fintech, payments witnessed a number of large exits in H1’18, including successful IPOs by EVO Payments and GreenSky, Paypal’s $2.2bn acquisition of iZettle and Vantiv’s acquisition of WorldPay in the UK. The regtech sector also got off to a hot start in H1’18, with $1.37bn invested, already surpassing the 2017 total.
Blockchain moving beyond experimentation
Blockchain continued to draw a significant amount of attention from investors in H1’18, with investment typically focused on more experienced companies and consortia looking to obtain additional rounds rather than on new market entrants. Large rounds in blockchain companies were seen during the first half of 2018, including $100m+ rounds to Circle Internet Finance in the US, and $77m to Ledger in France.
Strong outlook expected for fintech investment
With a significant amount of capital waiting to be deployed, a growing diversity of fintechs hubs across the globe, and more and more corporates looking to leverage fintech in order to drive innovation, investment in finech is expected to remain strong heading into the second half of 2018.
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About KPMG Fintech
The Financial Services industry is transforming with the emergence of innovative new products, channels and business models. This wave of change is driven by evolving customer expectations, digitalization, as well as continued regulatory and cost pressures. We are passionate about supporting clients to successfully navigate this transformation, mitigating the threats and capitalizing on the opportunities. KPMG Global Fintech comprises professionals in over 45 fintech hubs around the world, working closely with financial institutions and fintech companies, to help them understand the signals of change, identify the growth opportunities and to develop and execute on their strategic plans.
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