London is benefitting most from a global boom in fintech investment, according to research by consultancy firm Accenture.
The firm said the growth of a London fintech cluster is being fueled by the city’s traditional strength in the financial services sector, with some 135,000 financial services tech workers based in the U.K. for entrepreneurs and startups with a financial flavour to draw on.
The Accenture study, entitled “The Boom in Global Fintech Investment; A new growth opportunity for London”, is based on an analysis of global fintech investment data from CB Insights.
Globally, fintech investment has more than tripled over the past three year, according to the study — rising from $928 million in 2008 to $2.97 billion in 2013 — with fintech investment increasing at more than four times the rate of overall VC investment.
Although the U.S. remains the dominant market for fintech investment value, the fastest growing region for fintech deals is now the U.K. and Ireland (UKI). Here deal-volume, which the study said mostly relates to London, has been growing at an annualized rate of 74% since 2008 vs 27% globally and 13% in Silicon Valley.
Over the same period, the value of fintech investment in UKI increased nearly eightfold — to $265 million in 2013 — with the annualized growth rate (51%) nearly twice the global average (26%) and more than twice that of Silicon Valley (23%).
The study also found that UKI now accounts for more than half (53%) of all fintech investment in Europe — with London emerging as the fintech capital of Europe.
While growth in fintech investment in UKI is outstripping other global regions, the market is still described as “immature”, and lags far behind Silicon Valley for total funding value.
Accenture said fintech companies in SV took in $950 million in venture funding in 2013 alone, while investment in UKI has only totaled $781 million since 2004. But clearly the growth rate of the latter region means it’s fast making up for lost time.
The study also noted that a much larger proportion of fintech investment in UKI is first-round investment, compared to SV and elsewhere. Last year nearly half (47%) of UKI investment was first-round deals compared with 36% globally and just 27% in Silicon Valley.
“The fintech boom is a huge opportunity for London with its well-developed financial and technology industries,” said Accenture’s Julian Skan, MD of its FinTech Innovation Lab London, commenting on the study findings in a statement. “It is also crucial to London maintaining its position as the leading global financial center because of the growing importance of technology to the financial industry.”
Skan also noted the growing number of fintech incubators and accelerators in London, and “increasing” levels of interest from big banks and the VC community in fintech startups.
One recent newcomer to the London fintech scene is Startupbootcamp, which announced a dedicated fintech incubator just last month — based at London’s St Katherine’s Docks, a stone’s throw from the City’s Square Mile financial district.
Despite growing impetus in London for those with the biggest checkbooks to invest in fintech startups’ big ideas for money, Skan said there are still regional challenges for entrepreneurs to overcome.
“It is harder to raise funding, and entrepreneurs are less focused on commercializing new ideas than in the U.S. It is also difficult for small entrepreneurial companies to gain entry to big global banks,” he noted.
But it is at least less hard than it used to be to raise a round in UKI to get your fintech startup flying.
Accenture’s London FinTech Innovation Lab, which was launched in 2012, including with backing from a dozen major banks in London, is holding its investor day today. The Lab said that they “majority” of participants in last year’s program have gone on to sign deals with banks, and collectively the intake has raised $10 million in new financing.
(For some comparative context, the 18 alumni companies from the Lab’s New York-based sister program, founded back in 2010, have raised a total of $47 million in venture financing.)
The London Lab’s 2014 crop of fintech startups include Erudine, FinGenius, Logical Glue and PixelPin from the U.K.; PhotoPay from Croatia; Squirro from Switzerland; and uTrade from India. Fintech ideas being invested in include one-tap mobile payments, using photos for login rather than a PIN, and artificial intelligence.
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