UK fintech investment triples in H1, KPMG finds
Despite the almost threefold increase, geopolitical uncertainty, high levels of inflation and the high interest rate environment resulted in ‘more subdued’ levels of investment
UK fintech investment hit $7.3bn (£5.7bn) in the first half of 2024, almost triple the $2.5bn (£2bn) reported the prior year, according to KPMG’s latest Pulse of Fintech report.Despite the almost threefold increase, geopolitical uncertainty, high levels of inflation and the high interest rate environment resulted in “more subdued” levels of investment when compared to the record highs seen in 2021.
Over the period, investment was strengthened “significantly” by the size of many of the deals, including the $4bn (£3.1bn) buyout of financial software company IRIS Software Group by Leonard Green, a $999m (£786m) VC round by small business-focused marketplace platform Abound, and a $621m (£489) raise by neobank Monzo.
In total, 198 UK M&A, PE and VC fintech deals were completed in H1 2024, down from 284 in H1 2023.
Despite the fall in the total number of deals, the UK remains the centre of European fintech investment, KPMG found, with British fintechs attracting more funding than their counterparts in the rest of EMEA combined.
Hannah Dobson, partner and UK Head of Fintech at KPMG UK, said: “With the new UK government in situ and the potential long awaited drop in interest rates having finally arrived, there are hopes that fintech investment will start to show signs of recovery as we move into the latter part of the year and early 2025.
“We are expecting to see growing investment interest in AI and its use in the fintech and regtech space. Regulation remains a key focus in the EU – particularly with crypto and digital asset businesses as they navigate the new EU’s Markets in Crypto Assets (MiCA) regulation, which is expected to arrive in December 2024.”
Karim Haji, UK and global head of Financial Services at KPMG, added: “The high cost of capital and geopolitical uncertainty – linked to conflict and elections, have put a significant damper on all global investments so far this year, and the fintech market isn’t immune to that.
“Investors are acting cautiously, and not only when it comes to large transactions. On the M&A front, in particular, given concerns about valuations and the profitability of potential targets, investors are focussed on improving the companies they already own rather than buying new.”
