Venture capital in European FinTech reaches decade-high level

The European fintech market is attracting ever-higher levels of venture capital, as US and Asian institutional financing is pouring into the region on a wave of optimism surrounding the segment. Fintech corporate finance is being driven by the growing appeal of segments such as BYOD, consumer payment technologies, budgeting apps and FX trading technologies, among others. Business transfer agents are certainly seeing fintech firms represent a greater share of their portfolio. As the fintech market continues to grow, we believe it is vital to have the network and the profile to identify the widest range of potential buyers as regional financial solutions are brought to solve global technology challenges.

Venture capital in European fintech saw its highest level in over 10 years in Q1 2014, with 14 businesses ranging from big data to payment processing firms attracting €166 million in financing according to Dow Jones VentureSource. The previous time the European market attracted such levels of investment was in Q1 2000, when 42 companies raised €263 million. The impressive results for the first three months of the year mark a strong contrast to Q4 2013, when 17 companies only raised €55 million.

Payment firms have become especially in demand among corporate financiers, with London-based fintech start-up GoCardless raising $7 million from venture capital firm Balderton Capital in January and London-based cross-currency transfer start-up Currency Cloud raising $10 million from Atlas Venture and others in April. London continues to be the hotspot for fintech start-ups and financing in the region. However, Europe remains well behind the US, where 36 firms raised a total of $1.3 billion in Q1 2014.

The fintech market is going through a reinvigorated period as consumers are becoming more aware of financial digital tools and businesses are seeing greater opportunities in streamlining operations. This growing demand is leading a renaissance that is helping establish fintech as a strong, stand-alone technology segment. Europe, with its major commercial and consumer-facing financial hubs such as London, Frankfurt and Geneva and an encouraging regulatory environment, is nurturing a dynamic fintech landscape, offering start-ups the opportunity to test their products in smaller markets that have more agreeable regulatory norms. The region is also seeing a boom in consumer finance, which is driving offerings such as peer-to-peer lending and rates-comparison apps.

Furthermore, the European impact of the global economic downturn of 2008-2009 and the following sovereign debt crisis have encouraged local technical specialists and banking professionals to find solutions on issues such as operational deficiencies, weak data collection and non-performing consumer loans. Strong mobile broadband infrastructure and the growing penetration of smartphones, especially among Western European economies, are seeing a growing focus on mobile-based fintech solutions, especially for business-to-consumer interfaces. The fintech space is likely to heat up further this year, although businesses will hope to avoid the dotcom crash that spoiled the party the last time the market reached this level of VC interest.

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