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The first three months of this year saw a record investment in UK financial technology (fintech) firms as confidence returns after a cautious year for investors.
According to the figures from Innovate Finance, the quarter saw $2.9bn invested, which was over four times higher than the same period in 2020, and two-and-a-half times higher than the previous quarter.
There were 117 deals, six of which were worth more than $100m, including Checkout.com ($450m) and Starling Bank ($376m).
Innovate Finance said there are increasing number of UK fintechs announcing initial public offerings (IPOs) and unveiling plans to list their business on public markets.
Charlotte Crosswell, CEO of Innovate Finance, said the figures are encouraging after a “turbulent year in 2020”.
“It’s brilliant to see the speed and vigour with which investor confidence has returned, and the first-quarter investment figures for the fintech sector look very encouraging. It’s clear that the appetite to fund high-growth, ambitious businesses is back, and investors are ready to put capital behind UK fintechs that are now so vital to our economic and business recovery,” said Crosswell.
“Fintech is the fastest growing sector of our economy, and these latest figures show that, despite barriers along the way, capital will always follow great ideas – and the UK is full of them.”
A Treasury-commissioned review of the UK’s future in fintech, published in February, told the government that it must urgently introduce effective policies in five key areas if the fintech industry is to continue to thrive.
The review by Ron Kalifa, chairman of fintech giant Worldpay, made recommendations in five key fintech areas: skills, spreading the industry nationally, investment, overseas trade, and policy and regulation.
A group of senior figures within the UK fintech sector has written an open letter to the chancellor of the exchequer, Rishi Sunak, in support of the Kalifa review recommendations.
The letter said: “As senior leaders in innovation and financial services, we see the huge potential for fintech to be one of the UK’s most successful industries and exports in a post-Brexit world, in addition to evolving our financial services sector.
“The UK has been the global torchbearer for financial services and its future is inextricably linked to fintech. The UK can remain the global leader by adopting a more coordinated and structured approach for a sector which creates jobs, drives innovation and delivers benefits across the country. We write to collectively express our support for the roadmap set out in the Kalifa Review.”
As well as Innovate Finacne’s Crosswell, signatories include James Bardrick, CEO at Citi UK; Anne Boden, CEO at Starling Bank; Checkout.com’s CEO Guillaume Pousaz; and Visa Europe CEO Charlotte Hogg.
“The UK cannot afford to rest on its laurels. We must do all we can to capitalise on our current position of strength, ensuring that the UK benefits from the sector’s significant potential to stimulate economic growth and create new jobs, to bring investment to our ecosystem and deliver new opportunities for reskilling employees,” added the letter.
Speaking at Fintech Week, Sunak set out government proposals to support fintech including regulatory support and a new taskforce to lead the UK’s work on a central bank digital currency.
“Our vision is for a more open, greener and more technologically advanced financial services sector. The UK is already known for being at the forefront of innovation, but we need to go further,” he said.
“The steps I’ve outlined today, to boost growing fintechs, push the boundaries of digital finance and make our financial markets more efficient and will propel us forward. If we can capture the extraordinary potential of technology, we’ll cement the UK’s position as the world’s pre-eminent financial centre.”
Read more about UK fintech
- Demand for tech professionals in the fintech and digital payments sector bounced back strongly after a short pause during the initial Covid-19 lockdowns.
- The importance of immigrant workers to the UK’s fintech sector highlighted by government planned fintech visa.
- Less-established fintechs have been hit the hardest by the drop in investment capital, but there is light ahead for those that survive.