UK, which had managed to maintain robust levels of fintech investments longer than its European counterparts, saw investment numbers sharply fall last year
A stronghold of European fintech investment scene – UK – witnessed an abrupt decline in fintech funding in 2022. As calculated by KPMG, total UK fintech investment fell from $39.1 billion in 2021 to $17.4 billion in 2022, illustrating a steep 56% decline.
The fall is registered just as rising interest rates and inflation put downward pressure on companies’ valuations, dampening investor interest and risk tolerance. Overall, 2022 brought the UK fintechs 593 M&A, PE and VC fintech deals – a significant downgrade from the 724 funding events seen in 2021.
At the same time, the UK has remained a leader in fintech funding, as British firms attracted more investments than their counterparts in the whole EMEA combined. For instance, the Americas saw a $40 billion drop in fintech funding compared to 2021. Therefore, UK fintech investments rated among the top three, preceded by the US and Australia only.
Globally, fintech investment fell to $164.1 billion across 6006 deals in 2022, compared to a record $238.9 billion across 7321 deals the previous year.
Nevertheless, the obvious drop in investment value doesn’t mean investors are abandoning the industry. In fact, the global number of registered deals was the second-highest total next to 2021. The thing is, investment amounts were more moderate, as large deals could be perceived as riskier in a deteriorating economic environment.
Segment-wise, the most-funded fintech area was payments, with $53.1 billion in investment vs $57.1 billion in 2021. Besides, regtech even managed to overthrow the downward trend, witnessing investment rising from $11.8 billion in 2021 to a record $18.6 billion.
On the contrary, investment in crypto and blockchain fell from $30 billion in 2021 to $23.1 billion in 2022, as a series of bankruptcies shook the market.
Another positive factor is an increasing diversity of jurisdictions attracting significant fintech deals. Not only traditional hubs like the US, UK, Singapore and Hong Kong (SAR) attracted $100 million+ fintech deals in H1 2022, but also less mature fintech hubs like South Korea, Luxemburg, Italy, Malaysia and the UAE joined the club.
Growing diversity of well-funded fintech projects reflects global desire and commitment to support small business growth across the globe and improve financial inclusion.