Investment in UK fintech sees fall amid global turmoil

The first half of 2022 saw a 65% reduction in the amount of money invested in UK fintechs, as the global economy slows.

However, the drop is exaggerated due to the unprecedented high growth experienced last year.

A total of $9.6bn was invested in UK fintechs in the first six months of this year, compared with $27.8bn for the same period in 2021, according to KPMG’s biannual Pulse of fintech report.

During the period, 262 UK merger and acquisition, private equity and venture capital fintech deals were completed, compared with 341 in the same six months last year.

KPMG said: “Geopolitical uncertainty, turbulent public markets, ongoing supply chain disruption, high levels of inflation and increasing interest rates have all contributed to more subdued levels of UK fintech investment compared with the record highs experienced in 2021.”

The UK is therefore not unique in reporting falling investment, and despite the UK slowdown, five out of the 10 largest fintech deals in the Europe Middle East and Africa region were completed in the UK.

Total global fintech funding reached $107.8bn, with 2,980 deals in the first six months of 2022.

John Hallsworth, client lead partner for banking and fintech at KPMG UK, said: “Despite a slowdown in UK fintech investment compared with last year, the UK remains at the centre of European fintech innovation, with British fintechs attracting more funding than those in France, Germany, China, Brazil and Canada combined.”

Anton Ruddenklau, global fintech leader at KPMG International, said that because 2021 saw huge investment in fintech, the latest figures look worse than they are.

A KPMG report earlier this year revealed Investment in UK fintechs was seven times higher in the full year 2021 than in 2020. It found that UK fintech investment increased from $5.2bn in 2020 to a “staggering” $37.3bn (£27.5bn) last year.

“Taking out 2021’s outlier results, global fintech investment and interest was quite positive in the first six months of this year,” it said.

“While the uncertainty permeating the market is expected to continue into the second half, the diversity of fintech subsectors, combined with the diversity of jurisdictions attracting fintech investments, could help keep investment in the space relatively solid over the near-term.”

According to Hallsworth, one area of fintech that is on the up is anti-money laundering technology, as banks seek to comply with sanctions, embargoes and other regulatory measures as war continues in Ukraine.