Global fintech investment hits record $118bn, but Brexit hampers UK

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Global fintech funding rose to $111.8bn in 2018, up 120 percent from $50.8bn in 2017, fueled by mega M&A and buyout deals, according to the latest KPMG Pulse of Fintech report

The UK saw $20.7bn overall in 2018, with London as the main fintech hub. This was a staggering rise from the $5.6bn recorded in 2017, accounted for the majority of fintech funding for the region - more than half of which came from the $12.8bn WorldPay acquisition in the first half of the year. 

Brexit weighs on sentiment

However, in the second half of last year, investment dropped significantly, which KPMG said suggested that “fintech investors in the UK may have drawn back due to Brexit uncertainties”.

Fintech deal volume declined markedly in the second half of 2018, but still reached 2,196 deals for the year, up from 2,165 in 2017, the report said. 

Increasing geographic diversity of fintech VC funding continues to help drive deal volume, even as larger fintech hubs see more concentrated investment in larger deals. 

“The growing deal sizes, higher levels of M&A activity and the geographic spread of deals all highlight the increasing maturation of the fintech sector on a global scale,” said Ian Pollari, Global Co-Lead, KPMG Fintech. 

“Fintech start-ups in markets as diverse as Germany and Brazil are attracting larger and later stage rounds, while the more established fintech leaders in the US, UK and Asia are making their own investments and acquisitions in order to expand their product and geographic reach.”

Regulation to impact sector

The report also noted that increasing regulatory a legal rules were likely to impact the sector.

“Beyond new fintech-fueled business models, the increasing regulatory and legal obligations emanating from PSD2, GDPR and other regulations are impacting  both established players and emerging fintechs,” said Anton Ruddenklau, Global Co-Lead, KPMG Fintech.

“As a result, there is increasing interest in technologies - like AI and machine learning - that can be used to help manage compliance requirements more effectively. There's little doubt that technology investment is going to go up, up, up.”

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