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January 11, 2016updated 31 Aug 2016 10:31am

Peter Thiel leads the march on foreign investment in UK and European fintech

Analysis: Names from abroad are increasingly taking notice of fintech in the UK and Europe.

By Charlotte Henry

European Fintech is now attracting money from some of the world’s biggest venture capitalists, notably Paypal founder and Facebook investor Peter Thiel.

The superstar investor has put money into the thriving London scene, investing $6m into Transferwise. As with Facebook, Thiel put his money into Transferwise early on in the firm’s existence.

Elsewhere in Europe, Thiel recently put £744,000 into German firm Deposit Solutions, which allows people to use products from multiple banks without switching banks.

Deposit Solutions is the third German fintech firm that he has invested into during the last year. The others are Number 26, a mobile banking app into which Thiel put €10m, and $44m into Kreditech, which is for people who do not have a good credit history. Thiel invested in the latter firm in a personal capacity, while the investment for Number 26 came via his Valar Ventures outfit.

Thiel’s investment in Transferwise is far from the only occasion on which a UK fintech player has received investment from foreign investors, as UK fintech becomes an increasingly popular destination for outside venture capital.

For example, US venture capital firm Greycroft Partners put money into money transfer firm Azimo, as part of a round led by UK based investors Frog Capital. The round also included money from E.Ventures.

Starling bank, the mobile only bank led by for Allied Irish Bank boss Anne Boden that focuses exclusively on current accounts, has also announced today that it has received a £48m investment from US quantative investor Harald McPike.

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"Starling Bank will provide people with the kind of innovative leaps in their financial lives that they have experienced in transportation and video streaming, so this is an investment opportunity I could not pass up," McPike said.

Starling is in the process of getting regulatory approval to operate from the Prudential Regulation Authority and the Financial Conduct Authority.

Other UK firms such as a Funding Circle and WorldRemit have also received major investment, and London and Partners has revealed that 2015 was a recording breaking year for investment into UK tech firms, including the $58m put into TransferWise, and $100m invested in WorldRemit.

Another, Currency Cloud, is used by some of the firms named, and received investment from Silicon Valley based firm Sapphire Ventures, and Rakuten fintech find.

As the number of such investments grows, Lisa Moyle, head of financial services and payments at techUK, told CBR there are many reasons why investors would look to put their money into the Capital:

"London’s unique mix of tech talent, entrepreneurial spirit and supportive financial regulatory environment, all in the context of the depth and experience of the UK financial services sector, means it is ideally placed to develop the fintech stars of the future and undeniably attractive to foreign investors."

In the case of Azimo, the firm’s CEO Michael Kent, told CBR that with the money the firm has been able to "serve hundreds of thousands of customers and have built the most comprehensive global network of any digital money transfer business."

Kent said that the outside investment "has both raised our profile globally and given us access to investors who truly understand how to globally scale a business."

He also said Euope as a a whole was becoming attractive to investors due to the pan-regional nature of regulation in the contintent.

As fintech has developed, London has been known as a hub of industry talent, and external investors now seem to be embracing that.

However, other European countries are still attracting investment from a range of sources too. During 2014 $306m was invested into start up firms in the Netherlands, while $345m went into fintech firms in the Nordic region.

By comparison, in the same year, firms in the UK and Ireland had $623m worth of investment, and Germany had just $82.

For Thiel himself, the increased European investment is something of an about turn. He has previously condemned Europe’s tech scene as a "slacker with low expectations" which hold it back, and blasted EU law makers for regulating tech giants like Google, Uber, and Facebook. He told the FT that "I distrust the power of the EU regulators to make things better.

Interestingly given his recent investments, Thiel also said that he thought people in Berlin work less hard than those in London, and blasted German e-commerce copycat firm Rocket Internet.

Rocket Internet itself invested in London based online pawbroker Borro in February 2015.

Often though where he leads, other investors follow, so do not be surprised to see even more investment into this burgeoning UK and European markets during the year to come.

 

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