London flexes its FinTech muscles
Written by Scott Thompson
Global investment in financial technology ventures has risen from $928 million in 2008 to $2.97 billion in 2013. And over the past three years it has increased at more than four times the rate of overall venture capital investment, according to a new report by Accenture.
Although the United States remains the dominant market for FinTech investment, the fastest growing region is now the United Kingdom and Ireland (UKI). Deal-volume, mostly related to London, has been growing at an annualised rate of 74 per cent since 2008, compared with 27 per cent globally and 13 per cent in Silicon Valley. During the same period, the value of FinTech investment in UKI increased nearly eightfold to $265 million in 2013. The annualised growth rate (51 per cent) was nearly twice the global average (26 per cent) and more than twice that of Silicon Valley (23 per cent).
As a result of the rapid growth in UKI, which accounts for more than half (53 per cent) of all investment in Europe, London has emerged as the FinTech capital of Europe, according to the study. This has been driven by its strength in financial services and a thriving tech sector that has enjoyed an entrepreneurial renaissance in recent years. Although Ireland has a developing tech industry of its own, it is closely integrated with London’s FinTech cluster by incubating companies that look to London’s large financial centre in pursuit of customers, talent, partnerships, and funding.
Accenture’s research analysed data from CB Insights, which shows that while investment in UKI is growing fast, the market is still relatively immature. FinTech companies in Silicon Valley received $950 million in venture funding in 2013 alone, while investment in UKI since 2004 has totalled $781 million. And a much larger proportion is first-round investment. Last year 47 per cent of UKI investment was first-round deals compared with 36 per cent globally and 27 per cent in Silicon Valley.
Accentures's Julian Skan comments: “For a relatively new sector, FinTech is developing fast. There are growing number of incubators and accelerators and increasing interest among both the big banks and the venture capital community. But there are still challenges to overcome. It is harder to raise funding, and entrepreneurs are less focused on commercialising new ideas than in the US. It is also difficult for small entrepreneurial companies to gain entry to big global banks.”