Financing for fintechs soars as banks look for piece of the action

Global investment in financial technology companies reached an all-time high last year as more banks began to back innovative start-ups, new figures show.

Overall, financing for fintechs rose 18 per cent in 2017 to $27.4 billion (€22.3 billion), led by a surge in deals in the US, the UK and India, an analysis of data from CB Insights shows.

The analysis, which was carried out by Accenture and showing the value of deals in the US, jumped 31 per cent to $11.3 billion last year, while investment round values in the UK almost quadrupled to $3.4 billion. In India, deal values rose nearly fivefold to $2.4 billion.

The number of deals recorded in the fintech sector also rose sharply, jumping from just over 1,800 in 2016 to nearly 2,700 last year.

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Volume

Global investment in fintech firms between 2010 and 2017 stands at $97.7 billion, with US start-ups accounting for 54 per cent of the total. The volume of fintech deals globally, within that timeframe, grew at a compound annual rate (CAGR) of 35 per cent, with total funding growing at a CAGR of 47 per cent.

According to CB Insights, part of the reason for the strong performance last year was that traditional banks, who have by and large tended to ignore fintechs, are now increasingly backing them.

In addition to upping their investment in start-ups, banks are also opting to buy fintechs outright with last year seeing more acquisitions by banks than ever before.

Nonetheless, since 2013, only 18 fintech start-ups have been acquired by just 10 per cent of the leading banks in the US. Of these, eight deals were completed last year.