UK loses its fintech crown as China tops rankings for value of deals, a study confirms [Research]

A brand new study confirms the UK is losing its fintech crown in the aftermath of Brexit.

Produced by Innovate Finance, the independent not-for-profit membership association representing the UK’s global fintech community, the research pointed out that global fintech venture capital surged in the first three quarters of the year, with worldwide VC investment up by 27% year-on-year, whilst UK fintech firms suffered a 26% fall in investment in the year to September.

Nevertheless, the country still remains the third-largest market for fintech firms with a share of market of 3.5% in value considering that some $532 million of the UK deals were reported up to the third quarter while global deals completed in the first nine months of the year had a combined value of $15.2 billion.

Moreover, considering the number of deals closed, the UK counts 76 deals on 839 in total (9%) across 57 countries in the world as the US leads the ranking with 457 deals.

fintech-investments

UK investments to Q3 2016 has decreased 26% YoY. (Source: Innovate Finance). 

Globally the top 3 deals came from China which topped a value of $7,117 million if compared to the US ($5,265 million) despite a much lover number of deals (14 vs 457) while, with regard to the UK, 8 of the top 20 deals were post Brexit, totaling $105 million  of investment, as there was just one UK deal in the top 20 global ones.

uk-deals

In the UK, YTD Q3 2016, over 60% of deals were in Challenger Banks, SME Financing, Money Transfer, and FX and Digital Currencies and Blockchain verticals. (Source: Innovate Finance).

Find out more here.

UPDATE 1:  18 November 2016

Earlier today, Laurence Wintermeyer, the CEO of Innovate Finance, contested in an op-ed published by the English media outlet City A.M., that

“the sword of Damocles is not hanging over UK fintech.”

In particular, he argued that:

Overall, in 2016, UK fintech is not clipping at the run rate we would like to see and at the end of the third quarter we find ourselves at 50 per cent of total 2015 volume with some work to do in the final quarter.

This seems plausible in a year of such market volatility and implied economic uncertainty as a result of the referendum result, which has seen many investors sit on the sidelines. Innovate Finance member Nutmeg has done a great job kicking off fourth quarter funding by raising $37m, the first leg of its current funding programme.

However, following Brexit, the fact that fintech investment is recovering from its second quarter slowdown indicates that, while we must remain cautious, especially around the availability of seed and early stage funding, the UK fintech community is carrying on with the business at hand: raising growth capital to accelerate the delivery of innovative fintech solutions to customers.

And as for the other two questions I get asked now – “Are members leaving?” and “Will another European city become the world’s major FinTech hub?”

The answers are “No, none of our members have communicated to me they are leaving the UK” and “No European fintech hub will take over the dominance of London”. What we have here is remarkable and we will work together as a community of entrepreneurs and innovators to remain the world’s greatest fintech ecosystem.

Find out more here.

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