According to the latest figures from ‘The Pulse of Fintech’ quarterly report, total venture capital investment in the UK dropped slightly during the second quarter of 2016 though fintech investment was less affected.
The report [PDF] by KPMG, along with KPMG Enterprise’s Global Network for Innovative Startups and CB Insights which launched on August 17th, 2016, analyses the latest global trends in venture capital investment data on the fintech sector.
It says that VC-backed fintech startups fell globally by 49 percent. But despite this decline, VC investment in fintech is on pace to exceed 2015 results.
The Q2 report shows that amid a tougher climate for marketplace lenders and a drop in mega-round activity, Overall global investment in fintech companies across both venture-backed and non-venture-backed companies totaled USD$9.4 billion. This was buoyed by Ant Financial’s $4.5 billion financing. Q2’16 saw VC-backed fintech companies raise $2.5 billion across 195 deals, a 12 percent drop in deal volume compared to Q1’16.
“The decline in fintech financing and deals is in line with what we’re seeing in the broader venture environment for startups, as VCs, as well as crossover investors, are pushing back harder on profitability and business model concerns,” said CB Insights boss Anand Sanwal.
The number of deals in the UK held a steady quarter over quarter while the total deal value only dropped from $117 million to $103 million. While not well reflected in the numbers, many investors were anxious regarding Brexit’s implications. A number of deals were delay in the quarter even in the fintech space.
However, regardless of Brexit, the report says the UK does not seems ready to give up its role as Europe’s fintech leader easily. This is as demonstrated by the country’s regulatory sandbox and its recent announcement of a fintech bridge with Singapore with the aim to make it easier for UK-based fintech companies to operate in that country and vice versa.
It says this highlights that the UK intends to continue to foster its strong fintech ecosystem. Leaving the EU may even give it more flexibility to offer fintech incentives.
KPMG partner Brian Hughes added:
“We are seeing more partnering by traditional financial services companies with fintechs to help develop new business models, while also enabling fintechs to expand their customer base and get the support they need to become sustainable.
“Although the overall VC investment in fintech is very positive, with InsurTech and Blockchain standing out as areas that continue to attract greater investment, the past quarter reflected a more cautious environment.”
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