FinTech investment has slumped 57 per cent in the first half of 2023 amid economic uncertainty, but the UK has maintained its position as a leading European financial centre, according to data from KPMG.
During the first six months of this year, total UK fintech investment declined to $5.9 billion (£4.6 billion), a sharp drop from the $13.8 billion recorded during the same period last year, due to rising interest rates, soaring inflation, and geopolitical tensions dampening investor confidence.
This decline has been recognised as part of a global trend, as both the number and value of fintech deals decreased worldwide. In the first half of this year, there were 2,153 fintech deals made globally, amounting to $52.4 billion, compared to 2,885 deals valued at $63.2 billion in the second half of the previous year.
Within the UK, 215 fintech deals were made in the first six months of the year through private equity, venture capital or mergers and acquisitions – nearly half the number compared to the 392 deals executed last year.
Despite this slowdown, British fintechs have continued to attract more funding than their counterparts across the rest of the Europe, the Middle East and Africa.
Dr Yi Ding, Assistant Professor of Information Systems at the Gillmore Centre for Financial Technology, commented: “The UK is a leading hub for FinTech, spearheading innovation across fields such as AI and digital currencies to constantly drive efficiencies and better support businesses and consumers. While it is disappointing to see the extent of the funding decline, it is no surprise to see the UK maintain its place as the leading destination for FinTech.”
“Despite a turbulent economy, it is vital that investors continue to support innovation, particularly at a research level, to ensure the safe development of emerging technologies that can transform businesses and drive economic growth. A collaboration of government, regulators, industry and academia can continue to spearhead world-class research and development, and, with investor support, the UK can harness this innovation to remain the go-to FinTech hub.”
John Hallsworth, client lead partner for banking and fintech at KPMG UK, noted that the UK attempting to improve its regulatory environment is key 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.
Wayne Johnson, CEO and co-founder of Encompass Corporation, commented: “With the UK at the forefront of FinTech investment, it is important to continue to build confidence in the industry and the innovative solutions, such as automation technology, which are delivering significant benefits on a daily basis.
“Now, more than ever, all parties supporting innovation to thrive is crucial to maintaining the UK’s position as a leading financial centre. Collaboration and development will also be key to meeting the UK’s goal of being internationally recognised as a tech superpower by 2030 while, ultimately, driving wider economic growth.”
The UK’s ambition to establish itself as a global crypto hub has received much praise, especially as many US firms face regulatory scrutiny from the Securities and Exchange Commission (SEC).
Venture capital giant, Andreesen Horowitz, has announced plans to open an office in the capital by Christmas, and Coinbase’s CEO Brian Armstrong has also suggested the possibility of relocating their headquarters to London.
Hallsworth added, “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.”
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