Brexit and Trump are letting Germany steal Britain’s fintech crown
By Oscar Williams-Grut for Business Insider
Global investment into fintech companies fell in the third quarter of the year, with investors put off by uncertainty surrounding Brexit and the US elections, according to new data from KPMG and CB Insights.
The UK looks at risk of losing its position as Europe’s fintech capital, with German fintech funding surpassing British for the second quarter in a row. UK companies raised $78 million in the third quarter, compared with Germany’s figure of $108 million.
Germany is now on track to have greater investment into fintech in 2016 than Britain.
Globally, $2.9 billion (£2.3 billion) was invested into fintech — financial technology — companies around in the third quarter of 2016, according to the Pulse of Fintech report, which measures equity transactions to venture capital-backed fintech companies globally.
That is less than half the amount invested in fintech in the third quarter of 2015 and represents a sharp drop off from the $9.4 billion invested in the second quarter.
KPMG and CB Insights write in the report: “The US and the UK bore the brunt of market uncertainties during Q3’16.
“Between the aftermath of the Brexit vote in the UK, the ongoing US presidential election and the pending increase in US interest rates, it is not surprising that many investors in Europe and North America took a pause with respect to deploying capital.”
The slowdown means KPMG and CB Insights forecast that 2016 will see only a slight increase in investment into VC-backed fintech companies compared to last year.
However, a rival report from data provider Pitchbook and trade body Innovate Finance, also released on Wednesday, claims fintech investment has already surpassed 2015 total of $14.9 billion and stands at $15.2 billion globally in 2016.
KPMG and CB Insights say in their report that VC-backed US fintechs raised just $900 million in the third quarter, compared to $1.7 billion in the second quarter of this year and $2.8 billion in the third quarter of 2015.
Pitchbook and Innovate Finance’s figures show total VC investment in UK fintech firms so far this year is 26% lower than what it was at the same time in 2015.
Lawrence Wintermeyer, head of fintech trade body Innovate Finance, told the Financial Times that he is aware of 30 fintech startups that have had funding either cancelled or postponed in the wake of the Brexit vote.
However, the KPMG and CB Insights report says: “Despite these challenges, the UK is still well-positioned to maintain its spot as a fintech powerhouse, especially once investor confidence begins to recover in coming quarters. Post-Brexit, the UK may even be able to offer advantages over other European nations that will enable fintech to thrive.”
Across Europe, fintech funding declined from $443 million in the second quarter to $233 million in the third.
KPMG and CB Insights add that the outlook for fintech globally remains positive despite the funding slowdown, saying: “As market uncertainties begin to stabilize in Q4, fintech investment may regain momentum.”
The report adds: “The drop-off in fintech investment is in part due to a lack of $1 billion+ mega-deals, which have helped prop up the numbers in previous quarters.
“Q1’16 for example, included $1 billion+ funding rounds to JD Finance and Lu.com, which represented almost half of Q1’s total fintech investment.”
Asia was the only continent to see a quarterly increase in fintech funding in the third quarter, with $1.2 billion invested compared to $800 million in the second quarter. Four of the top five biggest funding rounds in the third quarter were also in Asia. But even here, the number of deals fell to a 5-quarter low.
First appeared at BI