U.S., EU fintech investments rise; China, India fintech volume declines

by Wesley Brown (wesbrocomm@gmail.com) 245 views 

Global investment in financial technology ventures fell sharply in the first half of 2019 as fundraising and deal activity in China, which had soared a year earlier, ground to a halt. The trend partially offset strong gains in the U.S., U.K. and several other European countries, according to a recent analysis by Accenture and CB Insights.

The total value of so-called fintech deals globally in the six months ended June 30 was $22 billion, compared with $31.2 billion in the same period of 2018, a decline of 29%, the report states. The drop was due mostly to the lack of larger fintech deals like Ant Financial’s record $14 billion fundraising in May 2018. Discounting that transaction, global fintech investments would have climbed 28% in the first half of 2019 over the same period last year.

However, the value of deals in the U.S. in the first half of 2019 jumped 60%, to $12.7 billion, even though the number of transactions was virtually unchanged from the first half of 2018 (564 vs. 563), signaling a trend of larger deals in the world’s biggest and most active fintech market. The largest portion of funding, 29%, went to lending startups, followed by those in payments, with 25% of the total. The largest deal was the $1 billion that consumer finance fintech Figure Technologies Inc. secured from a credit facility in May.

Fintech investment in the U.K. nearly doubled, to approximately $2.6 billion, and the number of deals jumped 25%, to 263, as challenger banks and payments companies continued to draw investors’ interest. For example, Monzo raised $144 million in June; Starling Bank raised $211 million from two separate transactions in February; money-transfer startup TransferWise closed a $292 million deal in May; and WorldRemit raised $175 million in June.

“There’s been a lot of interest and demand from consumers for new fintech propositions, particularly in the U.K. and elsewhere in Europe, which helps explain the big jump in investments there,” said Julian Skan, a senior managing director in Accenture’s Financial Services practice. “Fundraising is also moving to support the scaling up of challenger and collaborative fintech, which will cause lumpiness in some rounds as we get to the business end of the investment cycle where investors look for returns based on a sustainable bottom line, rather than another buyer. However, the question is: How long can that last? Fundraising is likely to reach a plateau soon and will most likely dip going forward.”

Other European markets also made big strides, with investments in German fintechs more than doubling in the first half of 2019, to $829 million from $406 million in the same period last year, led by the $300 million that challenger bank N26 raised in January and the $125 million investment in insurance tech Wefox Group in March. Fundraising in Sweden more than quadrupled, to $573 million, while fintechs in France raised $423 million in the first half of 2019, 48% more than a year earlier.

There were also large fundraising gains in the Asia Pacific, with the value of deals in Singapore nearly quadrupling, to $453 million, and the value of deals in Australia more than tripling to $401 million. Investments into payment startups and those in lending took the bulk of global fintech fundraising, accounting for 28% and 25% of the total, respectively, while insuratechs raked in 14%.

The number of fintech deals globally rose about 2% from the first half of 2018, to 1,561, but activity was mixed in the world’s largest markets. While the number of deals was flat in the U.S. and rose sharply in the U.K., China and India experienced volume declines of 49% and 21%, respectively. But these were offset by higher volume elsewhere, including other parts of Asia — with Singapore and Japan seeing the number of deals increasing 55% and 33%, respectively — and in Europe, with the number of deals doubling in Sweden, to 40% and rising 27% in Germany to 56.

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