By Roger Baird on Wednesday 6 February 2019
Investors clamour for fintech start ups showed no sign of quietening down last year.
Investors appetite to back fintech start ups shows no signs of easing, with record global investment more than doubling to almost $31bn last year.
Fast-growing fintech firms attracted $30.8bn across a total of 349 deals last year, compared to $15bn tied up in 369 deals in 2017, according to a fintech mergers and acquisitions (M&A) market report by corporate finance advisory firm Hampleton.
The survey said as “fintech start ups mature” the “average funding round has doubled in size compared to 2017”. It added that on top of this, the average venture round in the Asia-Pacific region is almost double the global average.
M&A activity topped $63bn last year, with $50bn of that spread across 189 transactions in the first half of 2018. However, there was a marked slowdown in the final six months of the year, with just $13bn raised across 160 transactions.
The survey said M&A slumped in the second half of 2018 was because there were no “blockbuster deals” such as US investment house Blackrock’s $17bn acquisition of media group Thomson Reuters’ data unit last January.
The biggest M&A deal in the second half of last year was US financial service group State Street’s $2.6bn acquisition of American investment data provider Charles River Systems in July.
Hampleton director Jonathan Simnett said: “In the latter half of 2018, the UK continued to lead the way in fintech in Europe, breeding a new generation of innovators with record levels of investment following the lead of new unicorns like Monzo and Revolut.
He added: “Retail banking has led the charge in upgrading digital consumer experiences, whilst incorporating fintech into core banking products, whereas investment banks have been more focused on integrating robo-advisory services.”
The report said that fintech firms attractive to investors are pioneering a variety of cutting-edge technologies. It said the “adoption of biometric technologies is becoming widespread among consumers”, as is smartphone fingerprint authentication and facial recognition for payments.
However, the survey adds that the growth of Artificial Intelligence technology “is more likely to resemble a gradual process than a quantum leap into new data sources and methods”.
It also said that the biggest players in fintech are emerging “at a regional rather than global level, in similar fashion to traditional retail banking, reflecting differing business and regulatory conditions”.
The report predicts that in 2019 that floations and M&A will continue to characterise the fintech sector.
Hampleton’s Simnett said: “Going forward, it is anticipated that the largest fintech firms will soon realise value through IPO in 2019. Meanwhile, most start ups that have grown large enough to gain traction, attract a strong customer base and produce a profitable balance sheet, will remain small enough to be acquired by fintech and traditional incumbents leading to an ongoing process of consolidation and M&A.”