Highlights 

• UK’s fintech investments hit new record after its £18 billion buying spree.
• Global fintech investments have risen to US $98 billion in H1 2021, putting UK at the second position behind the US.
• As the UK emerges from the Covid-19 crisis, private equity, venture capital, and M&A deals are pouring in.

Financial technology, or fintech, is a globally emerging industry which uses technology to enhance and improve the delivery of financial services and related processes. UK’s fintech investments have recently hit a new record after its £18 billion buying spree. In the first half of the year 2021, the UK has become the second after the US in terms of investments, as the overall global fintech investments have touched US $98 billion. 

Fintech in UK

Offering technological talent, innovation, progressive and supportive regulations, the UK has become a leading fintech hub which delivers an extensive financial services experience to users. The UK is exporting more and more number of fintech firms across the globe, and is in turn setting global standards for innovation and technology application in financial services. As an enthusiastic participant in the fintech revolution, the UK government invests heavily in the financial services sector across all four nations in the kingdom. With around 1,600 fintech firms in the UK, which is expected to double by 2030, the UK has been assessed as the best place for fintech worldwide. Approximately 44% of the fintech unicorns of Europe are based in the UK, with a skilled workforce of 76,500 people. With over 70% people in the UK using fintech products, it ranks among the top 10 countries worldwide for consumer fintech adoption. The largest banking and fintech market in Europe is in London.

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New fintech investment record

With deals worth approximately £18 billion in the first half of this year, a new record has been hit by Britain’s fintech investments, making it hold the second position after US in terms of total investments in the financial technology sector. Continuously dominating Europe’s fintech sector, London’s Square Mile attracted worldwide investors, who bought over 280 companies which were among the UK’s most advanced digital financial companies. Even though the UK government failed to secure a profitable Brexit deal which would have supported the financial companies which were operating inside the EU single market, the buying spree was still successfully carried out.

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According to KPMG’s Pulse of Fintech report, which is a bi-annual report on fintech investment trends published by the consultancy firm, investments worth $24.5 billion (£17.7 billion) were received by the UK, which was four times more than the investments UK received in 2020 ($5.9 billion). The US secured investments worth $42.1 billion, which made the UK stand only second to the US. Financial data provider EODHD/Others secured an M&A deal worth $14.8bn gave a major push to the investment spree in the UK, as per KPMG. But the 283 deals completed in the UK, which have set a new record, were complete way before anywhere outside the US.

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The investments by the venture capital firms, which buy startups and small businesses in the UK fintech sector also increased to US $6.2 billion, which was double of the amount the sector received in the second half of 2020. London, more than any other city worldwide, is a home to 3,018 fintech companies, as per recent reports. In June, the value of Tractable, which works in collaboration with automotive insurance companies and enable users in taking photographs of their damaged cars and submitting them to support their insurance claims, increased to £1 billion, by raising $60 million.

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Even though the world is facing the Covid-19 pandemic, fintech valuations still remained quite high, according to KPMG. In the first half of the year, a record 163 companies across the globe have hit £1 billion valuation. From US $87.1 billion in the second half of 2020, the fintech investments across the globe have shown a significant increase, and have jumped to a record high of US $98 billion in the first half of 2021. Karim Haji, UK head of financial services at KPMG, said substantially higher funding has been secured by the UK fintechs, as compared to their equivalents in the EMEA region (Europe, the Middle East and Africa). A major reason for the recent surge is corporate investments even during the pandemic is the digitalisation of financial services in UK and the race it has started among major banks and financial institutions.

The UK has become a major attractive fintech market for investors, as it already carries a historic reputation of providing high quality financial services, and at present to, it is capitalising on the opportunity of digitalization and investing heavily in the fintech sector.

Summing up

High funding rounds and rising valuation of fintech firms, along with successful exits, show that the digitalisation process that surged during the pandemic will continue to stay. The investor confidence and appetite in increasing, leading to a growth in momentum in the financial technology industry.