Over the last few years, the European fintech scene has seen tremendous growth. According to the State of European Fintech 2019 report, fintech is Europe’s largest venture capital investment category. It received 20% of all venture capital in Europe – a higher percentage than in Asia & USA.
And the COVID-19 crisis hit. The State of European fintech report for the current year (2020) states that overall, fintech is a resilient European tech growth engine for now. European fintech funding by VCs and PE firms in H1 2020 is reported to be down by around 10%, but when corrected for Government funding it is up 20%. The reports also predict that raising funds could become more selective and may drop in Q4 and 2021.
€169.9M for fintech startups
In a recent development, global wealth manager UBS Group has launched UBS Next, a $200M (nearly €170M) strong portfolio that targets investments in the fintech and broader tech ecosystem.
UBS Next will be funded exclusively by UBS and will be managed by a dedicated tech venture investment team with market-proven capital expertise.
Strategic priorities
The new initiative will primarily pursue direct investments into early-stage fintechs and other relevant tech companies. In addition to direct investments, UBS enters strategic collaboration with Anthemis. This global venture capital firm has been identifying fintech companies for over a decade and will help accelerate investment opportunity identification and deal flow for UBS.
According to UBS, through equity investments, UBS Next allows the bank to further strengthen connections to the fintech ecosystem. It ensures closer strategic alignment with key partners and provides an upside when portfolio companies succeed.
UBS has been driving both internal initiatives, as well as existing strategic partnerships and external collaborations with technology companies, startups, regulators, peer banks, other market participants, academia and industry thought leaders to help identify up-and-coming fintech startups and boost deal flow.
Mike Dargan, head of Group Technology, says, “UBS Next is a further step to accelerate our innovation efforts as well as to identify and apply the latest technology for our client businesses. With our investments through close collaboration with Anthemis, we widen our access to fintech startups.”
UBS Next is focused on enabling UBS’s key strategic priorities including:
- Codeveloping digital innovation and ecosystem through partnerships, research and innovation pipeline management, facilitated by centers of excellence;
- Modernising and modularising technical estates, leveraging new technologies, such as public cloud, microservices architecture, and AI
- Finding new and effective ways to engage with clients and deliver services, as well as evolving business models to drive growth across UBS with cutting-edge technologies and solutions
Prior to this, UBS Next has collaborated with other firms as opposed to investing in them for tech solutions. Earlier in August, as members of the Fintech Open Source Foundation (FINOS), UBS and GitLab signed a multi-year contract for strategic collaboration to address common industry challenges and drive innovation in the financial industry.
According to UBS’s recently released third-quarter 2020 results, the bank registered a net profit of $2.1B (approx €1.78B) in Q3 2020 – up 99% YoY.
Image credit: UBS