Investments in UK fintech have reached record levels of £2.6 billion since February 2018, and the question on everyone’s lips is: Will this growth be sustainable, or will investment trends change as the sector matures and more start-ups look to scale up their businesses?
As fintech businesses reach a level in their lifecycle where their value is increasingly apparent, many get publicly listed, while others sell to financial institutions at remarkable multiples of their revenue or adjusted profits. By turning ideas into reality, fintech entices more traditionally conservative investors.
The sector’s lucrativeness is also attracting new types of investment. Over the past five years, crowdfunding has become a popular method of fundraising, allowing individuals to invest in unlisted companies. This trend is expected to continue in 2019, with crowdfunded companies providing a profitable exit opportunity to original investors in the form of initial public offerings or other exit events.
Fintech companies have been referred to as “start-ups”, with a focus on the product, scaling application and network as opposed to the company’s profits; but as more companies become sufficiently developed, with investors and management teams with their eye on profits, this will likely lead to further successful organic growth or exit events this year.
With continued innovations in cryptoassets, augmented reality and artificial intelligence, investors are well aware of these technologies’ potential and power, and are therefore valuing businesses based on the size of their network, or potential network, and are applying a monetary value to each possible customer within the ecosystem.
While Brexit poses uncertainty and the UK Government continues to debate the logistics of a deal, fintech companies continue to develop innovative technology and products. Further scaling up of start-ups this year is expected, as are ongoing technological developments, which will maintain peaked interest from investors.