UK FinTech ‘attracts $532m in VC investment’ in Q3 2016

The UK came third in terms of total global VC investment in FinTech up to Q3 2016.

According to research published by Innovate Finance, some $532m was invested in UK FinTech, whilst firms in China attracted $7.1bn in investment and US financial technology firms raised a total of $5.3bn.

Challenger banks, the research found, proved the most popular when it came to securing funding in the UK.

Starling Bank, SETL, Tandem Bank, Sonovate and Ezbob were the top five FinTech deals this year, each surpassing the $25m deal size mark.

Lawrence Wintermeyer, CEO of Innovate Finance, commented on the findings:

“While the UK still attracted a high number of deals for FinTech there’s been a significant drop in investment year on year to Q3 2016, possibly due to the referendum result on Brexit and the future uncertainty of the relationship between European markets and the financial services sector.”

He continued: “While Brexit uncertainty may continue to have an impact on investor behaviour, remaining attractive to international talent is just as important to maintaining the UK’s current position as the world’s premier FinTech hub.”

A closer look

Despite large funding rounds such as Starling’s $101m raise in Q1, the research says that many FinTech firms lost out to funding during Q2, as a result of the uncertainty created in the run up to the EU referendum.

The UK’s YOY performance in terms of VC investment in FinTech during Q1 remained steady, but according to the report, it slowed down “dramatically” during Q2 – during which period investment was 33% lower than that of the same quarter last year.

Investment, the report adds, recovered “modestly” in Q3 2016, showing a 7% improvement when compared to the same time period in 2015; with eight of the top 20 FinTech deals closing post-Brexit totalling $105m.

According to the research, Entrepreneur First was the most active investor in the UK’s FinTech sector, having participated in five deals during YTD Q3, closely followed by Balderton Capital, which took part in four investment rounds.

Techstars, Passion Capital and Index Ventures followed with three investments each.