London is benefiting from a boom in financial technology (fintech) investment, according to a new study by IT firm Accenture.
Globally, investment in fintech ventures has more than tripled in the last five years, rising from US$928 million in 2008 to US$2.97 billion in 2013. But it is London in the UK that is currently leading the way in terms of fintech venture-capital investment.
Accenture’s research, which is based on data from CB Insights, shows that deal volume in the UK and Ireland (UKI) as a whole has been growing at an annualised rate of 74% between 2008 and 2013, compared to 27% globally and 13% in Silicon Valley. The value of fintech investment in the region has also increased nearly eightfold to US$265 million in the same timeframe, growing at an annualised rate of 51% – nearly double the global average and more than twice that of Silicon Valley.
With four of the world’s ten largest banks having either global headquarters or European headquarters in London, this growth has been driven by the capital’s traditional strength in financial services, as well as its thriving IT sector that has enjoyed an entrepreneurial renaissance in recent years. Today, there are approximately 135,000 financial-services technology workers in the UK.
“The fintech boom is a huge opportunity for London with its well-developed financial and technology industries,” said Julian Skan, Accenture managing director overseeing the FinTech Innovation Lab London. “It is also crucial to London maintaining its position as the leading global financial centre because of the growing importance of technology to the financial industry.”
However, while growth in fintech investment in UKI is outstripping other regions, the market is still relatively immature – last year nearly half of UKI investment was first-round deals compared to 36% globally and 27% in Silicon Valley. The region also falls behind in terms of venture funding. Fintech companies in Silicon Valley received US$950 million in venture funding in 2013 alone, while investment in UKI since 2004 has totalled US$781 million.
“For a relatively new sector, fintech is developing fast,” said Skan. “There are a growing number of incubators and accelerators and increasing interest among both the big banks and the venture capital community. But there are still challenges to overcome. It is harder to raise funding, and entrepreneurs are less focused on commercialising new ideas than in the US. It is also difficult for small entrepreneurial companies to gain entry to big global banks.”
Accenture’s study, entitled The Boom in Global Fintech Investment; A new growth opportunity for London, was released at the second annual Investor Day of the FinTech Innovation Lab London. Launched in 2012 by Accenture and a dozen major banks in London, with support from the Mayor of London, the City Corporation and the Technology Strategy Board, the initiative aims to provide support and mentoring to early-stage fintech companies. The majority of participants in last year’s programme have gone on to sign deals with banks and between them have raised US$10 million in new financing.
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