Investment in the UK’s fintech sector almost tripled in the first half of 2024, new data shows, as a slew of major deals helped the country retain its title as the centre of European fintech funding.
Total UK fintech investment came in at $7.3bn (£5.7bn) over the six months, up from $2.5bn (£2bn) during the same period in 2023, according to figures from KPMG.
However, investment remains subdued compared to record highs seen in 2021, with geopolitical uncertainty, elevated inflation and higher interest rates dragging on investor confidence.
The UK was hit particularly hard, with a torrid 2023 that saw investment in the country’s fintech sector drop more than a third from the previous year, according to previous KPMG data.
But underscoring a quick turnaround, this year’s biggest deals have included the $4bn (£3.15bn) buyout of financial software firm IRIS Software by Leonard Green, a debt and equity round for credit technology firm Abound that could extend up to £800m and digital-only bank Monzo raising $610m (£490m).
The UK outperformed the wider Europe, Middle East and Africa (EMEA) region, which experienced a $7.7bn (£6bn) drop in investment to $11.4bn (£9bn) over the six months.
British fintechs attracted more funding than their counterparts in the rest of EMEA combined, the data showed.
Dealmaking volumes continue to struggle, however, with 198 UK M&A, private equity and venture capital fintech deals completed in the first half, down from 284 a year prior.
“With the new UK government in situ and the potential long awaited drop in interest rates having finally arrived, there are hopes that fintech investment will start to show signs of recovery as we move into the latter part of the year and early 2025,” said Hannah Dobson, UK head of fintech at KPMG.
Karim Haji, KPMG’s UK and global head of financial services, added: “The high cost of capital and geopolitical uncertainty – linked to conflict and elections, have put a significant damper on all global investments so far this year, and the fintech market isn’t immune to that.
“Investors are acting cautiously, and not only when it comes to large transactions. On the M&A front, in particular, given concerns about valuations and the profitability of potential targets, investors are focussed on improving the companies they already own rather than buying new.”