UK fintech investment in the first half fell a hefty 65% to $9.6 billion from $27.8 billion in the same period the previous year, as the global economic slowdown took its toll on the sector, according to a report from KPMG.
The decrease was due to a combination of geopolitical uncertainty, turbulent public markets, ongoing supply chain disruption, high levels of inflation and increasing interest rates all contributed to the more subdued levels of investment.
KPMG also said last year’s transactions were bolstered by the size of many of the deals, which included the $14.8 billion Refinitiv deal in January 2021.
It said if this deal had not been included, the drop in UK fintech investment would not be nearly as significant and is well above H1 2019’s figure of $3.8 billion.
Five out of the ten largest fintech deals in H1 2022 in the EMEA region were completed in the UK.
The country is not alone in seeing a slowdown in fintech investment, with the Americas and Emea regions both seeing total investment and deal volume slide.
Total global fintech funding across M&A, PE and VC reached $107.8 billion across 2980 deals in H1 2022.
Payments continued to attract the most funding among fintech subsectors, accounting for $43.6 billion in investment compared to the $60.3 billion seen during all of 2021.
Crypto-focused companies attracted $14.2 billion during H1, including a $1.1 billion raise by Germany-based Trade Republic in June.
Regtech also remained resilience in the first half, attracting $5.6 billion in investment across 157 deals.
“The fintech market experienced a massive year globally in 2021, which makes it look like investment has somewhat fallen off a cliff so far in 2022, ” said Anton Ruddenklau, global fintech leader, KPMG International. “That really isn’t the case. We’ve simply shifted back to levels seen in 2019 and 2020.”
John Hallsworth, the client lead partner for banking and fintech at KPMG UK, added, “Similar to the UK, the EMEA fintech market also experienced a slight drop in investment in the first half of 2022 with $26.5 billion of investment across the region, down from $31.6billion in the second half of 2021. The decline was mainly driven by a fall in M&A deal value, which sank from $15.7 billion in H2’21 to $7.2 billion in H1’22.
Regtech has been a particularly hot sector in the EMEA region in the last few months. In the wake of the conflict in Ukraine, there has been strong interest in anti-money laundering applications as banks seek to comply with sanctions, embargos and other regulatory measures.”
