Overall global VC investment for FinTech increased by 10.9 % to $17.4 billion in 2016 with 1,436 deals, according to statistics compiled through PitchBook by UK industry association, Innovate Finance.
UK VC investment for FinTechs was down 33.7% at $783 million and is less than two thirds of the 2015 total of $1.2 billion. Nine of the top 20 UK deals closed post Brexit, with total investment after the referendum results of $368 million. 46% of investment into the UK was from non-domiciled VCs, largely coming from Europe (19%) and the US (18%). Starling Bank, iwoca, Nutmeg, SETL, and BillFront rounded up the top five FinTech deals in the UK, all over $30 million in deal size. 29% of the UK VC investment in FinTech in 2016 was into alternative lending and financing, followed by challenger banks (20%), wealth management (10%) and money transfer and FX (10%).
China, meanwhile, outpaced the US for the first time in deal value at $7.7 billion while US investment decreased in 2016 by 12.7% to $6.2 billion, despite being the global leader in volume at 650 deals. The top three global FinTech deals came from China, with Alipay, Lu.com and JD Finance leading the charge and raising over $6.7 billion collectively. Alipay raised the biggest FinTech VC round in history in 2016 at $4.5 billion. InsurTech firm Oscar led the US rounds, attracting the most funding at $400 million. The UK attracted 173 deals in 2016, the highest volume outside the US at 650, and remained third place behind the US and China in terms of total FinTech investment, which totaled $783 million in the UK. Of the top global deals, only one company was from the UK – Starling Bank, which secured $101 million in funding.
“Whilst UK FinTech venture investment is down 33.7% in 2016 at $783 million, largely attributed to the uncertainty of Brexit and geo political/ macro economic factors, Q3 funding rebounded, and 9 of the top 20 deals completed in the 6 months following the referendum, with the UK retaining its global ranking in third place,” says Lawrence Wintermeyer, CEO at Innovate Finance. “The loss of passporting rights will hit FinTech payments firms if special provisions to the single market are not negotiated upon leaving the union. However, maintaining and further improving access to global FinTech talent has superseded passporting across the FinTech community’s post-Brexit priorities. Over 30% of Innovate Finance FinTech founders and CxOs are non-British with many employing European staff. Attracting further investment to UK FinTech remains the number one priority.”