European fintech funding enjoys buoyant quarter while US market tanks

VC funding to fintech companies in Europe spiked in Q1, while US deal activity cooled, according to the latest figures from CB Insights.

Amid upcoming legisltation that could open the door for fintech companies to challenge incumbent banks, Europe saw Q1 funding to VC-backed fintech companies jump 222% sequentially. The spike in deal activity puts total funding dollars on pace to surpass $2.6 billion at the current run rate, the report states.

In total, fintech startups in Europe raised $667 million across 73 deals in Q1. Compared to the same quarter last year, Europe fintech funding rose 121%, while deals rose 38%.

Spurred by big dollar bets on Atom Bank and Funding Circle, the UK enjoyed a 57% jump in fintech deal activity for the quarter, re-affirming Britain's status as Europe's top fintech market despite the recent triggering of Article 50 and a planned withdrawal from the European Union.

The burst of activity in Europe is in sharp contrast to a more subdued outlook in US markets, where deal activity dropped nine percent sequentially and funding fell eight percent. CB Insights estimates that if the lacklustre pace of investment in Q1 continues throughout the year, funding to VC-backed fintech companies would drop 20% from 2016's dollar total.

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Comments: (2)

Gerard Hergenroeder - Payments Shark - Millersvile 27 April, 2017, 14:30

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I've been in Fintech for 45 years. We just called something else in the past. It is good to see all the investment activity for both the banks and Fintechs. From my experience I would encourage banks not to become too dependent upon Fintechs since eventually new Fintechs become commoditized in their offerings and industry capabilities. Banks still have a great trusted value propositon. Differentiation and innovation are still the hallmarks of future success. I would encourage banks to invest more in their own unique capabilities and evolve their own DNA for success.

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Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 27 April, 2017, 19:20

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Suppliers of technology to financial services sector have been around for ages. For lack of a better term, let me call them "finserv tech". Then came along fintech. At their inception, they were competing with finserv sector for customers with allegedly superior offerings and CX. That "disruption" story pumped up their valuation and attracted huge amount of funding. But that movie didn't have a happy ending when they realized it's not so easy to disrupt finserv sector. So, suddently, fintech morphed into suppliers of tech to finserv sector aka finserv tech. Finserv tech has been profitable for ages and didn't require VC funding, barring a few exceptions. For some reason that I can't fathom, fintech does what finserv tech has been doing for ages but it still makes losses and needs VC funding.