UK fintech investment jumped more that fourfold to $20.7bn last year, although growth tailed off in the second half of 2018 slowed by Brexit and easing world trade.
Britain cemented its status as the fintech capital of Europe with half of the top ten deals across the continent coming in the UK, led by London-based payments processor WorldPay’s $12.9bn acquisition by US rival Vantiv, according to KPMG’s biannual Pulse of Fintech report. UK fintech investment came in at $5.6bn in 2017.
Across the world fintech investment activity rose more than doubled to a record $111.8bn, fueled by M&A and buyout deals as investors back more mature firms in this sector.
The survey said America remains the world’s largest single region, jumping to $52.5bn last year from $24bn 12 months ago as the “fintech market in the US was very strong throughout 2018 with no shortage of opportunities for investment”.
However, the UK market saw investment drop sharply to $1bn compared to $2.8bn in the same period a year ago, “a trend reflected widely across Europe”, the report said.
In recent months economies Europe has been hit by a host of features ranging from yellow vest protests in France, disruption in the German car industry due to new emissions testing procedures, Brexit uncertainty, and the knock-on effects from a slowdown in the Chinese economy and the effects of the US-China trade war.
Last month, the International Monetary Fund lowered its estimates for growth this year by 0.2 percentage points to 3.5 per cent from October, blaming weaknesses in Germany and Turkey.
Germany and France last year “experienced a drop-off of fintech investment” said the report. In Germany, $1bn was raised across 57 deals, compared to $1.7bn across 88 deals in 2017, while France saw $294m raised on 34 deals in 2018 against $733m on 50 deals a year earlier.
KPMG global co-lead, fintech, Anton Ruddenklau said: “Fintech investment trends can be relatively agile but it remains to be seen if the drop in activity in the second half of last year is due to Brexit uncertainties or the start of a wider trend, possibly the end of this fintech cycle as the next generation starts to emerge. We have seen a noticeable squeeze for early stage funding as investors focused on more secure bets.”
He added: “Overall we expect fintech levels to remain robust in 2019 in part due to further consolidation from companies looking to increase scale.”
KPMG global co-lead, fintech Ian Pollari said: “The growing deal sizes, higher levels of M&A activity and the geographic spread of deals all highlight the increasing maturation of the fintech sector on a global scale.
Earlier this week, the UK kept its position as a world leader, ranked third globally in early stage fintech venture capital investment behind China and the US, as global investment in this sector hit a record $36.6bn across 2,304 deals in 2018, a 148 per cent increase on a year ago, according to industry body Innovate Finance.