WealthTech funding fuels growth in UK FinTech investment in the first quarter of 2019

WealthTech companies raised more than 35% of total UK FinTech investment in Q1

  • Capital raised by UK FinTech companies reached £994.3m across 46 deals in the first quarter of 2019. The capital raised so far this year is at 37.8% of last year’s total.
  • WealthTech companies in the UK have been increasing their share of total annual FinTech investment in the country since 2016. This share almost doubled from 17.3% in 2016 to 31.1% last year, showing investors’ appetite to fuel the disruption of traditional banking models and profit from innovative products in areas currently underserved by the financial services industry.
  • The average UK FinTech deal size has more than doubled over the last five years, increasing from £4.5m in 2014 to £11.2m last year. The increase was driven by the rise in the number of larger, later-stage deals as the UK FinTech ecosystems matures. This is demonstrated particularly in the UK WealthTech subsector with neobanks in the country raising large amounts of capital ever more frequently. In fact, there are 13 WealthTech companies in Europe which have raised more than $100m in total since 2014 and nine of these are headquartered in the UK (OakNorth, Atom Bank, Starling Bank, Revolut, Monzo, Tandem, Metro Bank, Nutmeg, Aldermore Bank plc).

UK FinTech investment hit a five-quarter high in the first three months of 2019

  • The amount invested in the UK FinTech sector has increased every quarter since Q2 2018, reaching almost £1bn in the opening quarter of this year.
  • London-based Greensill Capital, a provider of working capital finance for companies, raised $250m in last year’s largest round. The investment was made by US growth equity firm General Atlantic.
  • The biggest transaction in Q1 2019 was challenger bank OakNorth’s $440m funding round. The company, which provides SMEs with business and property loans, has raised more than $1bn across eight funding rounds since 2015 and plans to expand into the US this year. Additionally, Revolut, another London-based digital bank, has plans to launch in Singapore later in 2019 – the first step in its expansion plans in Asia. Continued aggressive expansion by UK challenger banks could see them build international customer bases over the next few years and become leading actors on the digital banking stage globally.
  • In every quarter last year between 23.4% and 49.3% of the total value invested was raised by WealthTech companies, this share remained high at 38.7% in the first quarter of 2019.

The top five UK FinTech transactions in Q1 2019 were completed by challenger banks

  • More than £850m was raised by the top ten deals in the first three months of the year. Six of these top funding rounds were raised by WealthTech companies and all but one of these transactions were completed by online banks. As a result, 69.9% of total UK FinTech investment in the first quarter of the year went into challenger banks, boosting total investment in the country that quarter.
  • The largest deal was OakNorth’s previously mentioned funding round. London-based Starling Bank completed both the third and fourth largest deals in Q1. The mobile-only bank received a £100m grant from the Capability and Innovation Fund. Metro Bank and ClearBank also received significant investment from this fund. These transactions are part of a scheme requiring RBS to boost competition in the sector as a condition of its bailout during the 2008 financial crisis. Starling Bank also raised £75m in a Series C round in February this year.
  • The remaining four largest deals which did not involve a WealthTech company, were completed by companies operating in the Payments & Remittances (GoCardles), RegTech (Featurespace) and Marketplace Lending subsectors (MarketInvoice, iwoca).

Investment in UK WealthTech companies recorded the biggest growth over the last two years

  • Despite uncertainty following the Brexit vote in 2016, the UK FinTech space has continued to flourish, with all of the top six FinTech subsectors seeing an increase in investment over the last two years. Total capital raised by companies in four of these subsectors (WealthTech, RegTech, Marketplace Lending and Real Estate) more than doubled between 2016 and 2018. The WealthTech and RegTech subsectors, which saw the largest percentage increases in investment, have been the main drivers of UK FinTech growth in the last two years.
  • WealthTech companies attracted 4.8x more funding last year than in 2016.
  • The RegTech subsector saw the second largest percentage increase, more than tripling since 2016. The largest deal in this subsector so far this year was FeatureSpace’s £25m transaction. The Cambridge-based startup, which offers Adaptive Behavioural Analytics solutions for fraud and risk management, has earmarked its latest capital injection for international expansion and product development.

The data for this research was taken from the FinTech Global database. More in-depth data and analytics on investments and companies across all FinTech sectors and regions around the world are available to subscribers of FinTech Global. ©2019 FinTech Global

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