UK remains European fintech lead despite major investment slump
Fintech investment in the UK slumped 57 per cent in the first half of the year as rising rates, high inflation and geopolitical tensions dampened investor sentiment.
Total UK fintech investment dropped to $5.9bn (£4.6bn) in the first half of the year, down from $13.8bn in the same period last year, according to data from KPMG.
The UK was part of a global trend, with both the number of deals and their value dropping. Worldwide there were 2,885 deals worth $63.2bn in the second half of last year. This fell to $52.4bn across 2,153 deals in the first half of this year.
In the UK, 215 fintech deals were completed in the first six months, whether through private equity, venture capital or M&A, which was down nearly half on the 392 deals completed last year.
However, the UK remained the European centre for fintech investment with British fintechs attracting more funding than peers in the rest of EMEA.
John Hallsworth, client lead partner for banking and fintech at KPMG UK, said: “Despite a slowdown in UK fintech investment compared to last year, the UK remains at the centre of European fintech innovation with British fintechs attracting over half the funding of Europe.”
Hallsworth noted that the UK is attempting to improve its regulatory environment in order to maintain its lead over European rivals. In particular, he highlighted the government’s approach to crypto regulation as a potential source for future growth.
The government has stressed its intention to make the UK a crypto hub, which has won plaudits from many US firms facing a clampdown led by the Securities and Exchange Commission (SEC).
Andreesen Horowitz, a venture capital behemoth, said it will be opening an office in the City by Christmas. Coinbase boss Brian Armstrong also suggested that the exchange could shift its headquarters to London.
“The UK is working hard to become a leading global centre for crypto and digital assets, building on its natural advantages… it is working to create the right regulatory environment to support a sustainable crypto and digital assets ecosystem and make it an attractive location to participants, while also protecting consumers,” Hallsworth said.
Despite the fall in fintech investment, separate data shared exclusively with City A.M. showed that UK banks and building societies were committed to investing hundreds of millions in modernising their payments infrastructure.
Across 50 UK banks and building societies, the average respondent plans to invest £27m on average into modernising their payments infrastructure to help speed up payments and improve security.
Peter Harmston, partner and head of payments consulting at KPMG UK, said: “The payments sector has experienced a relentless pace of change over the last few years which will likely slow down in the future.
“Banks must keep up to date with the latest technology to enable processes to be streamlined and further improve customer experiences,” he continued.