Study: UK catching up to US in paytech spending
The U.K. payment technology sector is booming and closing the gap on its closest rival, the U.S. However, the same report that brings this news also raises concerns about the appeal of U.K. paytech startups to potential buyers.
"Investments in paytech" was produced by the Emerging Payments Association, sponsored by The Bancorp and conducted by Accourt, a press release said.
The report analyzes the investment lifecycles of 113 paytech companies founded or operating in key western markets (France, Germany, Italy, Spain, U.K. and U.S.) between 2010 and 2015. It concludes that U.K. and U.S. companies dominate the market almost completely, with 90 percent of startups originating in these countries.
While the U.S. has more paytech companies overall, the U.K. is experiencing faster growth, the study finds.
In 2010, 13 percent of paytech startups were based in the U.K. compared to 58 percent in the U.S. By 2015, the U.S. had eked out 61 percent, while the U.K. had more than doubled its share to 28 percent.
The average U.K. paytech startup also doubled its seed funding during the period — from $840,000 in 2010 to $1.8 million in 2015. It is now nearly on par with U.S. rivals, according to the report.
U.K. startups also remain independently active for longer than those in other western markets. After five years, 43 percent of U.S. paytechs had either failed or had been acquired, while all of the businesses in the U.K. remained active and independent.
The report concludes that the U.K. is better at creating and fostering sustainable paytech companies, but potential buyers are hanging back until startups reach scale.
"It's gratifying to see the U.K. 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.
"One area the U.K. has led on is regulation and startups are clearly taking advantage of the unique conditions of the U.K. 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 startups, such as the cost and complexity of accessing Faster Payments," concluded Craddock.
The report, "Investments in paytech," is available for download from the EPA website.