The UK’s fintech sector saw investment drop $22 billion to $17 billion in 2022, as higher interest rates, inflation, and declines in valuations hit investor appetite. 

A total of 593 UK fintech deals were completed in the UK in 2022, down from 724 in 2021, according to KPMG’s Pulse of Fintech report published Wednesday. The dataset includes mergers and acquisitions, private equity, and venture capital. 

Funding for the sector in 2022 was a tale of two halves according to Karim Haji, a partner at accountancy firm KPMG. The first half of the year saw significantly more investment and deals than the second half.
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“The variance highlights the shift in investor sentiment in the face of increasing geopolitical challenges leading to the lack of IPO exits, the downward pressure on valuations, and market turbulence,” he said.

Global investment in crypto and blockchain firms fell from $30 billion in 2021 to $23.1 billion in 2022. Scrutiny in the space picked up as the price of digital assets slumped and the bankruptcy of FTX upended the market.

While British fintechs attracted more funding than their counterparts in the rest of EMEA combined, other fintech hubs are starting to catch up. The value of French fintech deals rose 28% to $3.7 billion last year, according to the KPMG analysis. Deals in Sweden, the home of Klarna, hit $3.7 billion, up from $2.6 billion. 

UK startups and investors are increasingly expressing concern over recent government policies that appear to run counter to the country’s ambition of remaining a global fintech leader. They point to examples including the recent pulling of crucial funding to the government-backed industry body Tech Nation, the lack of visas to attract startup talent, and the removal of tax relief for research and development. 

Worldwide, the fintech market attracted $164.1 billion across 6,006 deals in 2022. This was down from $238.9 billion across 7,321 deals a year earlier.


Source - ​https://www.bloomberg.com/news/articles/2023-02-15/uk-fintech-investment-plummeted-by-almost-60-in-2022-kpmg-says

The UK's Innovate Finance released news on the levels of investment in UK FinTech which shows it continues to increase despite global slowdown.

Highlights from the announcement include:

• Total capital invested in FinTech globally reaches $59bn – flat year-on-year
• UK FinTech sector continues to grow with investment reaching $9.1bn – a 24% year-on-year increase from 2021
• UK remains second globally in FinTech investment, behind the US, and the top destination of Europe
• Capital was spread across 3,045 deals – which is slightly fewer than 2021 which saw 3,401 deals in the first half of the year
• Global slowdown comes with some exceptions including the UK which recorded a 24% year-on-year increase from 2021
• Value of the top 5 biggest deals globally in the first half of 2022 was $5.0 bn, with Checkout.com, one of the top five from the UK. The largest deals from highest to lowest were for FNZ ($1.4bn), Trade Republic ($1.2 bn), Checkout.com ($1bn), Ramp ($748m) and Coda Payments ($690m)
• US received the most investment in the first half of 2022, bringing in $25bn in FinTech capital, with the UK firmly in second place with $9.1bn, rounded off by India ($3.9bn), Germany ($2.4bn) and France ($2.3bn)
• Some countries have seen notable drops in investment in the first half of 2022 including Mexico, Netherlands, South Korea, and China, all falling down the global rankings. 

Commenting on the findings, Janine Hirt, CEO of Innovate Finance the industry body, said: 

“It is fantastic to see that UK FinTechs are continuing to secure outstanding levels of investment – this is a testament to the strength of our ecosystem, including our innovative entrepreneurs and founders, strong and diverse talent pool, and a supportive government and regulatory framework. 

“It is critical that we now keep up this momentum. The UK is currently receiving more investment in FinTech than all of Europe, second only in the world to the US. We must continue to work together – industry, government and regulators – to build on this leadership and ensure the UK remains the best place in the world to start, build and scale a FinTech business. This will positively impact not only the financial services sector but the entire population of the UK as a whole who will benefit from new, innovative, and more effective products that drive greater financial wellness.”

Further Reading:

• Innovate Finance Press Release
• Innovate Finance Full Analysis
  

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​New report says that the Bristol & Bath region has one of the strongest FinTech ecosystems in the UK, including a high number of fast-growing startups and scaleups.

The report says that Bristol and Bath regions have proportionally more firms active in the FinTech sector than any other region Whitecap has reviewed to date. The report also finds that:

• 28 of the 107 firms identified are FinTech startups and scaleups
• Bristol & Bath has a larger number of early stage FinTechs than areas with populations more than three or four times its size.
• the UK's South West has also had more participants than any other region outside London in the FCA’s regulatory sandbox. 

Co-authored by Whitecap’s Julian Wells, Director & FinTech Practice Lead, and Stuart Harrison, Associate Director for the South West, the report is the first formal analysis of the FinTech ecosystem in the region and was supported and co-funded by a number of organisations in the South West, including FinTech West, BJSS, Clarke Willmott, DAC Beachcroft, Hargreaves Lansdown, Invest Bristol & Bath (the inward investment arm of the West of England Combined Authority), TLT LLP, and University of the West of England (UWE). Forewords from Innovate Finance and TheCityUK.

Source: https://www.whitecapconsulting.co.uk/press-release/report-finds-bristol-bath-is-a-uk-hotspot-for-fintech-entrepreneurs/

Posted by Peter Oakes (www.peteroakes.com)
#FintechUK #UKFintech
See also www.UKFintech.com www.FintechIreland.com