- According to a new report by Tracxn Fintech UK, the UK’s fintech industry has emerged as a top destination for start-up funding, despite a decline in the total amount being secured. Despite receiving $12.9 billion in 2021, funding for UK fintech start-ups fell 13% year-on-year (YoY) to $11.2 billion in 2022.
- The report attributes the decline to a 26% decrease in late-stage funding, which dropped from $9.8 billion in 2021 to $7.2 billion in 2022. In addition, the frequency of funding rounds exceeding $100 million declined, falling 34% from 35 games in 2021 to 23 matches in 2022.
- However, the report highlights a 34% YoY increase in early-stage investments, which rose from $2.6 billion to $3.4 billion in 2022. The average ticket size for seed-stage investments also increased by 26%, while the average ticket size for early-stage funding rose by 76% during this same period.
- Despite the impact of world events on the fintech industry and its consequences on investor behaviors, the report states that funding in the UK’s fintech sector has remained resilient, outperforming the results of US, China, and India.
- Tracxn also recognizes the UK’s top performers in the fintech space, with Y Combinator, SFC Capital, and the Development Bank of Wales identified as the primary seed-stage investors; Octopus Ventures, Force Over Mass, and LocalGlobe as the top early-stage investors; and Dawn Capital, BlackRock, and Toscafund Asset Management as the leading late-stage investors.
- The best-performing funding round in 2022 was by wealth management tech company FNZ, which raised $1.4 billion from Motive Partners and the Canada Pension Plan Investment Board during a private equity round in February 2022. The top-performing business models for funding in 2022 were related to payments, investment technology, cryptocurrencies, and banking technology. However, due to rising inflation, YoY funding for the banking technology and payment sectors fell by 55.7% and 31.4%, respectively.
- On the other hand, funding for the investment technology and cryptocurrency sectors experienced YoY rises of 206.6% and 107%, respectively. In Europe, the UK is currently the largest market for cryptocurrencies in terms of transaction value, making it an attractive investment opportunity for investors looking to venture into this space.
- The UK government has taken measures to position the country as a global hub for fintech and crypto asset technology. The report anticipates that introducing regulatory frameworks in the UK will encourage investment in the sector and build consumer trust. London has attracted the most investment to date, with $43 billion, followed by Edinburgh with $1.5 billion and Blyth with $731 million.
In conclusion,
the UK’s fintech industry remains a top destination for start-up funding, according to the Tracxn Fintech UK report. Despite a 13% decrease in year-on-year funding, with start-ups receiving $11.2 billion in 2022 compared to $12.9 billion in 2021, the report highlights the resilience of the UK fintech sector against economic shocks. The decline in funding was attributed to a 26% drop in late-stage financing and a 34% decrease in funding rounds over $100 million. However, early-stage investments saw a 34% increase year-on-year, and the average ticket size for seed-stage investments and early-stage funding also increased. The report recognizes the impact of world events, such as the ongoing war in Ukraine, on the fintech industry and its consequences on investor behavior. Despite these market shifts, funding in the UK’s fintech sector outperformed the US, China, and India’s results.
