It has been a record first half of the year for VC investment into London’s fintech sector, with new research from Dealroom.co and London & Partners revealing London-based fintech firms have already raised more VC investment than any other year, in only six months. London’s strong performance has also helped to drive record levels of investment into Europe’s fintech sector, with European fintech firms raising $13.9bn, up 51% on full year 2020 investment levels. London was at the heart of this growth, with its fintech firms accounting for over a third of all European fintech funding.
The bumper start to the year for VC funding sees the UK capital further cement its position as a global fintech hub, with investors pumping $5.3bn into London-based fintech companies – an increase on all previous full year investment figures for London’s fintech sector and over 2.5 times more VC investment than any other European city. Investment into London’s fintechs in the first half of 2021 is 2.4 times greater than during the same time period in 2020, showing investor confidence returning as the UK economy starts to recover from the global pandemic. London ranks second on the worldwide list for fintech VC investment so far this year, slightly ahead of New York ($5.2bn) and behind San Francisco in first place ($7.2bn).
London is home to 3,018 fintech companies, more fintechs than any other city globally. As the biggest global fintech cluster, the UK capital is also producing some of the world’s fastest growing fintech companies and is now home to 29 fintech unicorns, second only to San Francisco’s 37. Last month, London-based insurtech firm Tractable became the 100th unicorn in the UK after securing a $60m Series D deal. The new research also identifies 39 future fintech unicorns in London, or futurecorns – companies with a value of between $250m and $1bn – which are on the path to unicorn success. London futurecorns include digital bank Zopa, payments company Curve and pensions platform PensionBee.
Further analysis of the research shows London is well placed to take advantage of some of the fastest-growing fintech subsectors. Insurtech firms have seen a surge in VC funding over the last few years, with global investment increasing by 373% between 2016 and 2020. In the first six months of 2021, insurtech companies received $10.2bn VC investment globally, over three times the investment in January to June in 2020 and 2019. In London, VC investment into insurtech has grown rapidly too, with London-based insurtech companies receiving $718m VC investment in 2021 so far, up from $231m in the first half of 2020. Three London-based insurtech companies also joined the unicorn ranks this year following large funding rounds; Bought by Many ($350m Series D), Zego ($150m Series C) and Tractable ($60m Series D).
Cryptocurrency and Decentralised Finance (DeFi) has also seen a strong start to 2021, with global investment reaching $6.3bn, up from $400m in H1 2020, while funding into crypto and DeFi startups in Europe hit $1.4bn, three times full year 2020 investment figures. London leads in Europe for investment into the fintech subsector following two major funding rounds totalling $420m for London-based crypto scaleup Blockchain. Paris-based Ledger also closed a mega $380m Series C round in June 2021.
Payments still remains the largest fintech subsector globally, with London firms receiving $2bn in funding so far this year, accounting for 40% of the $5bn pumped into European payments startups. While investment growth for payments is not as rapid as into insurtech and cryptocurrency, there has been a string of major funding rounds for London-based payments companies this year, including Checkout.com ($450m), Rapyd ($300m) and SaltPay ($478m). VC investment into London’s banking startups also saw a strong start to the year, with London VC investment four times higher than the next European city, Berlin.
As the world continues to tackle the climate crisis, there are signs of early growth of a new generation of European fintechs focused on green impact, offering environmentally-friendly alternatives to fight climate change. While the green fintech ecosystem is still young, the latest research shows there was an initial acceleration of VC investment into green fintech companies in 2019, followed by 50% growth in 2020. 2021 funding into green fintech companies is also expected to surpass 2020 for both deal count and deal value. London is home to 30% of the 62 green fintech startups in Europe, including sustainable investing app Clim8, the world’s first Net Zero pension provider Cushon and TreeCard, which channels profits from merchant surcharges into reforestation programmes.
“It has been fantastic to see so much investment into London fintech firms. The UK is home to some of the world’s leading technology companies and we were thrilled to float in London earlier this year. The COVID-19 crisis has accelerated the shift to digital, creating significant opportunities for growth – we look forward to seeing further disruption within the fintech industry for the benefit of consumers.”Romi Savova, CEO at PensionBee