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VC investment in UK FinTech ‘outpaced Germany despite decline’ in Q1 2016

CB insights

Funding for VC-backed UK FinTech companies has fallen by 41% on a quarterly basis despite it still outpacing that of Germany, according to KPMG and CB Insights Pulse of FinTech Q1 2016 report.

Following on from the collapse of former UK payments unicorn Powa, the report says funding provided by VCs for FinTech firms slowed down in the UK.

Despite this, the report adds, VC investment in UK FinTech surpassed that of Germany thanks to WorldRemit’s and Ezbob’s funding rounds.

Additionally, the report found that while UK challenger bank Starling closed a $70m funding round in January 2016, no VC-backed FinTech companies in Europe raised more than $50m in the first three months of 2016.

China’s domination

Big deals in China, which represented almost half of all global investment in the space, dominated the FinTech space throughout Q1 of this year.

According to the findings, China’s dominance is expected to continue throughout Q2, especially given Ant Financial’s $4.5bn funding round in April.

Despite China’s strong hold in the space, the report says that other regions have completed deals in both the smaller and mid-sized categories.

Over in the US, Betterment and Oscar Health Insurance closed $100m+ funding rounds and there was also a significant number of $25m+ deals.

Meanwhile, in Europe strong deals took place in the UK, Germany and Ireland – a testament, the report adds, to the growing maturity of the European FinTech market.

Less focus on payments

Although the payments space has long been a key element of FinTech investment across the globe, this appears to be changing.

The report found that this was the case in North America, where there were fewer startups in the payments space during the first quarter of this year.

This, the report says, could be attributed to market saturation and the success of market leaders’ Square and Stripe.

According to the report, companies such as WorldRemit in the UK and Adyen in the Netherlands have proved that payment companies are still able to attract investment, but interest from US investors seems to have slowed down,

UK’s lead in RegTech

The report adds that European investors are beginning to take notice of RegTech (also known as RiskTech), a sub-sector of FinTech.

Many European financial institutions, the report says, want to decrease the costs associated with risk management and compliance monitoring and are on the hunt for technologies to assist with this.

“The UK is taking a leadership role in fostering RegTech growth in Europe and around the world,” the report notes, adding “Other countries may be following the UK’s activities closely, with Australia and Singapore, in particular, possibly considering to follow suit with regulatory sandboxes of their own”.

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