• "Across the spectrum of listed fintech businesses globally, there’s been an impressive bounce over the past 12 months. The KBW Nasdaq Fintech index is up 31 per cent over the past year, compared with a return of 25 per cent for the broader S&P 500. This index is tracked by a UK-listed ETF from Invesco with the ticker FTEK LON, though there are other index trackers in the fintech space including one from Global X — ticker FING — and another from Xtrackers which is based on the MSCI Fintech innovation index — ticker XFSN."

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• "One repercussion is that we may see more fintechs list on stock markets over the next year. UK-listed venture capital fund Chrysalis — one of my favourite investments at the moment — has a stake of about 1.1 per cent in Klarna, on a net asset value of $11bn, whereas the rumoured IPO price is closer to $20bn. Another key holding for the investment trust is insuretech business WeFox, which is showing signs of rapid growth."

Source: FT - read article here.  It is a very interesting article by David Stevenson, an active private investor. 

UK Fintech Sector Rebounds in Q1 2024, Attracting $1.4B in Investments

According to the latest report published by Dealroom and HSBC Innovation Banking, British startups garnered a total of $3.9 billion in funding during the first three months of 2024, with $1.4 billion directed towards the fintech sector.

"Among emerging frontier technology segments, semiconductors and quantum computing have been gaining momentum, for startups often based in science hubs like Cambridge and Oxford,” the report revealed. Challenger banks took the top spot, raising nearly $450 million in funding.
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Among the major deals, several late-stage funding rounds have been secured for prominent companies. Monzo, a digital challenger bank, garnered £340 million in a late-stage venture capital round, while Flagstone, a cash deposit platform, raised £108 million in a growth equity round.

These substantial funding rounds demonstrate investors' continued confidence in the UK's fintech ecosystem, despite the global economic challenges.

“With companies like Monzo leading the charge, Britain’s leadership in fintech has long been key to drawing in investment from around the world,” commented Saqib Bhatti, the UK's Technology Minister.

The results of this report stand in contrast to findings from other studies covered by Finance Magnates earlier this year. For instance, a report by Tracxn in January indicated that in 2023, UK fintech startups witnessed a decline of 63%, gathering only $4.2 billion compared to $11.2 billion in 2022. This downturn was confirmed by a report in February from KPMG, which noted that global fintech funding had reached a five-year low, falling to $113.7 billion.
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Market experts further forecast that AI will play an increasingly significant role in fintech. This was the topic of one of the recent panels during the Finance Magnates London Summit.

Most venture capital funding came from foreign investors (64%), with about one-third from domestic investors, marking a significant shift from a decade ago when local funds predominantly handled investments.

“This data reflects a busy start to the year for the UK innovation ecosystem,” commented Simon Bumfrey, the Head of Technology and Life Sciences at HSBC Innovation Banking UK. “From growth in investment in established and emerging areas like fintech and quantum computing to expansion of regional tech hubs across the length and breadth the country, there is much to celebrate.”

While London continues to lead in VC investments in the UK, gathering $2.4 billion in capital, the dynamics have shifted with a year-on-year decrease of 18%. However, substantial improvement in accumulated capital were noted in Cambridgeshire and Edinburgh, with increases of 59% and 406%, respectively.

Moreover, last month, Revolut, one of the largest British fintechs, warned that London's status as a financial technology hub is increasingly threatened due to rising external competition. Despite this, the company is still considering an IPO in London.
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Globally, the UK ranks third in startup investment, only behind the United States and China, while outpacing India.

Leaders of the UK's financial technology industry are urging the British government to increase tax relief and help them raise more investment, as some executives warn a shortage of domestic investors is holding back the sector.

Trade body Innovate Finance's "Unicorn Council", which includes the CEOs of Monzo, Revolut's UK arm and ClearBank, set out policy recommendations on Monday that it said would help the UK maintain its position as a fintech hub.

Global venture capital investments fell to a near five-year low in the first three months of 2024, according to data from PitchBook, as high interest rates dampened risk appetite.
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Fintech companies in the UK say there is not enough investment coming from UK-based investors in particular.

"There is a well-documented problem with capital supply in both the UK listed markets and private Growth Capital," the group's statement said.

“All of the investment across our biggest fintechs (is) all overseas. Where are the UK pension funds? Why isn’t that growth actually going into the pockets of the UK?" added ClearBank CEO Charles McManus, speaking at the Innovate Finance Global Summit (IFGS) conference held in London on Monday.

Innovate Finance CEO Janine Hirt told Reuters that there needs to be more domestic investment in fintech.

Source: https://www.reuters.com/world/uk/uk-fintechs-ask-government-help-ease-capital-shortages-2024-04-15/

​An arm of Standard Chartered, the FTSE-100 bank, is taking a stake in a British company set up with the objective of providing ethical financial products to customers.

City sources said that SCV, which is based in Singapore, was investing at least $10m (£8.02m) into Algbra, although neither the exact sum nor the resulting valuation could be ascertained.
As part of their collaboration, Algbra is understood to have agreed to use its core banking platform to build Shoal, a new digital venture announced in 2021 by Standard Chartered Bank to "give UK savers the power to help fund the fight against climate change".
Shoal was originally contracted to be built by Starling Bank, but will now see Algbra's technology deployed instead, according to one fintech insider.

Source: https://news.sky.com/story/standard-chartered-arm-takes-stake-in-british-fintech-algbra-13115431​

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