UK Fintech Investment Drops To Its Lowest In Four Years

Investment in financial technology companies in the United Kingdom fell to its lowest level in four years, according to a report from KPMG. High prices, global troubles, and low interest rates affected funding. Many investors did not invest much, creating challenges for fintech companies to expand.

Last year, fintech companies in the United Kingdom received £7.97 billion. This was much lower than the £10.95 billion the year before. KPMG said even with less funding, the country still received more fintech investment than France, Germany, China, India, Brazil, and Canada combined. This showed that the United Kingdom remained an important place for financial technology.

The UK Gains Almost Half Of All Fintech Investment

The United Kingdom accounted for almost half of all fintech investment in the EMEA region, which includes Europe, the Middle East, and Africa. The largest deal came from Zepz, a money transfer company, which raised £215 million in the second half of the year. Even though investment was lower, some companies still managed to secure funding.

The KPMG report showed that last year was tough for fintech funding in the EMEA region. Total investment in the region fell from £21.5 billion to £16.3 billion. The second half of the year saw a sharp drop, with funding going from £10.5 billion to £5.8 billion. Many companies found it difficult to raise money.

Hannah Dobson, a fintech expert at KPMG, said there were early signs of recovery. She explained that lower interest rates and more political stability could help fintech funding improve in the coming months. She said that while investment is currently low, the situation could be different later in the year.

Dobson also said new rules for artificial intelligence, buy-now-pay-later services, and cryptocurrency markets created challenges for companies to gain investment. The European Union’s AI Act and Markets in Crypto Assets (MiCA) Act, both introduced last year, added new rules that companies had to follow.

Fintech Funding In The Middle East Doubled Last Year

While most of the EMEA region saw less investment in financial technology, the Middle East had a different result. Investment in the region almost doubled from £0.9 billion to £1.7 billion last year. This was one of the few places where financial technology funding increased.

The report showed that more investors might sell their shares in financial technology companies when they begin earning profits. Since capital markets are under pressure, many investors are looking for ways to adjust their plans and get back their money.

Among financial technology sectors, payments stayed the most popular area for investment. Global investment in payments grew to £25 billion last year, rising from £13.8 billion in the year before. Late-stage deals and company mergers helped push this growth, showing that payments remained strong.

Karim Haji, head of financial services at KPMG, said payments continued to attract strong interest. He noted that as interest rates drop in different parts of the world, funding costs decrease, allowing more deals to happen. Haji said the future looked good for financial technology companies around the world.