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  1. Finance
12 April, 2022

What are the sweet spots in financial services FDI?

Investment Monitor explores the leading locations, sectors and investors when it comes to attracting FDI in financial services.

By Sofia Karadima

Financial services is a key sector within the foreign direct investment (FDI) industry, particularly when it comes to greenfield projects. Indeed, GlobalData’s FDI Projects Database tracked 1801 greenfield financial services projects, announced or opened, throughout 2019 and 2020.

The vast majority of the projects were new (86.3%), followed by expansion projects (13.5%). There was been also a small number of co-location projects, opened or announced, based in Mexico, Oman and Singapore.

What are the top FDI locations for financial services?

The US has received the majority of FDI projects in financial services, with Germany in second position, followed by the UK, Singapore and India.

The GlobalData figures show that the US has attracted a high number of greenfield projects in retail and commercial banking, investment management, financial leasing companies and other credit granting, and insurance and reinsurance activities. It has also attracted investments in venture capital and development capital as well as in investment banking. Investors based in the UK, Spain, Canada, Netherlands and Japan have invested the most in the US over these two years.

Investment management, insurance and reinsurance activities, retail and commercial banking, venture capital and development capital, and investment banking are the top five FDI sectors for financial services in Germany. The country has attracted the majority of these investments from the US, Switzerland, the UK and France.

The UK has attracted FDI in sectors related to retail and commercial banking, venture capital and development capital, investment management, insurance and reinsurance activities, wealth management, investment banking, security and commodity contracts brokerage, and miscellaneous financial services. The US has been the source country for the majority of the financial services FDI projects in the UK, followed by Germany.

US has also invested heavily in Singapore, with 30 FDI projects in financial services, announced or opening, during 2019 and 2020. Singapore also attracted investments from the UK, Japan, Hong Kong and Australia. The investments have mainly been in sectors related to investment management, venture capital and development capital, and retail and commercial banking.

As for India, the country scores high in attracting investments in retail and commercial banking and cryptocurrency. GlobalData figures how that the UK has been the source country for all the cryptocurrency projects, opened or announced, in India during this time period.

What are the top FDI sectors in financial services?

The GlobalData figures also show that the majority of the FDI financial services projects in 2019 and 2020 were in sectors related to retail and commercial banking, investment management, insurance and reinsurance activities, venture capital and development capital, security and commodity contracts brokerage, and investment banking.

Other sectors that attracted a strong flow of FDI projects in financial services were financial lease companies and other credit granting, wealth management, advisory services, miscellaneous financial services, and cryptocurrency.

There were also projects, announced or opened, in sectors related to investment and unit trusts (including open-ended investment companies) and wealth funds, administration of financial markets, property unit and real estate investment trusts, holding companies, pension funding, and central banks.

Who are the top FDI investors in financial services?

The majority of investors looking to invest in financial services FDI come from the US and the UK, according to the GlobalData’s FDI Projects Database.

Investors based in the US mainly opted for FDI projects in investment management, followed by investment banking, and insurance and reinsurance services.  The UK, Singapore, Germany, France and Ireland were among the top destinations for financial services FDI for US investors.

As for UK investors, they have financed FDI projects in the US, India, Germany, France, the United Arab Emirates, China and Ireland, among other destinations. The majority of these investments were in sectors related to retail and commercial banking, investment management, insurance and reinsurance activities, and venture capital and development capital among others.

Other key source countries for FDI in financial services were Switzerland, Germany, Japan, France, South Korea, Netherlands and Spain.

With many locations around the world vying to become regional or global international finance centres, the competition to attract financial services FDI is always fierce, with the likes of the US, the UK, Germany and Singapore consistently offering a particular appeal to foreign investors in the industry. Based on the data analysed here, these countries look likely to dominate the financial services scene for the years to come.

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