UK PayTech startups received $1.8m in seed funding on average last year, and the figures are now nearly on par with similar investment in the US, according to a report released by the Emerging Payments Association (EPA).
According to the ‘Investments in PayTech’ report, which analysed the lifecycles of PayTech companies founded or operating in key western markets between 2010 and 2015, the UK and US came out on top with 90% of startups originating in these two countries.
The report also found that despite the US having more PayTech companies overall, the UK’s sector had grown over the last six years, whereas the US sector had remained seemingly static.
In 2010, 13% of PayTech startups were based in the UK compared to 58% in the US. By 2015, the report adds, the US remained almost static with 61% of startups based there, while the UK had more than doubled its share to 28%.
“It’s gratifying to see the UK PayTech sector punching well above its weight – not only creating new ideas that become new companies, but also creating businesses that thrive beyond the startup phase to challenge the bigger players,” said Tony Craddock, Director General of the EPA, adding:
“While investors have recognised the potential in UK PayTech for some time now, it seems that prospective acquirers are less certain. PayTech companies and the broader payment industry needs to do a better job at showcasing the scale and scope of success in the UK. One area the UK has led on is regulation and startups are clearly taking advantage of the unique conditions of the UK to create sustainable businesses. However, much more can be done. Regulators should take note of what’s possible even when some aspects of the system work against start-ups, such as the cost and complexity of accessing Faster Payments.”
Additionally, the report found that startups in the UK remained independently active for longer than their rivals in other Western markets including the US.
After five years, the research adds, 43% of US PayTech firms had either failed or been acquired, while all of the businesses in the UK remained both active and independent.
Although the report says this is indicative that the UK is better at creating and fostering sustainable PayTech companies, the lack of acquisitions suggests a level of caution when it comes to acquiring startups.