Thought Piece

The UK | a resilient fintech investment environment

Posted: 6 Feb 2023

Resource Type: Thought Piece

In the wake of a global pandemic, and with an economic crisis threatening many of the world’s largest economies, 2022 was always likely to be a tough year for fintech investing.

Innovate Finance’s recently published fintech Investment Landscape report for 2022 showed that global investment in the sector dropped to $92 billion in 2022, down from $130 billion in 2021 - a fall of 30%, albeit from a record-breaking high.

UK resilience

But among the decreasing appetite from investors globally, the UK stood out as a resilient market.

UK-based fintech received $12.5 billion in investment spread across 546 deals compared to $13.5 billion across 583 deals in 2021, a decrease of just 8% from 2021. This is notably a much smaller decrease than the global average.

Many other countries, including the US, suffering a double digit decrease in investment.

London continues to be a leading global fintech investment hub with $10.2 billion received in 2022, down only 5% from 2021. The UK also led the top 10 largest deal rankings with two of the top three deals, FNZ and

“We must continue to work together with industry, government and regulators to build on this momentum and maintain the leadership of the UK as a global centre to start, scale and grow a fintech business,” said Janine Hirt, CEO of Innovate Finance.

“This is perhaps more important now than ever before as fintech continues to redefine financial services and provide greater financial support and access to consumers during the cost of living crisis.”

Speaking at an event to launch the report, Tim Levene, CEO of the UK’s only publicly listed fintech fund, Augmentum Fintech, said: “The UK has built an extraordinarily resilient fintech ecosystem, one with real depth and with a large number of success stories.

We have seen a large number of high quality international investors coming into the European market in recent years and the UK is very much the centre of gravity.

Tim Levene, CEO, Augmentum Fintech

He went on to say that he expected to see a pick-up in investor activity in the second half of the current year, citing what he saw as “significant dry powder” in the market, with a weight of capital yet to be deployed.

Global player

The report showed that the US received the most investment in 2022, bringing in more than $39 billion in fintech capital, with the UK firmly in second place with $12.5 billion.

So what makes the UK such a successful fintech market, especially given its relatively small size?

Axe Ali, partner at EY, said:

Fintech adoption rate in the UK is 71% - that's a lot higher than the global average which is 64%. The fintech sector currently has about 1,600 firms, and that's expected to double by 2030.

Axe Ali, Partner, EY

"So there is a huge incubation of fintechs coming through from what is a relatively small-sized population compared to the US.”

“The proliferation of fintech companies has also changed. It was a very London-centric ecosystem, but that has definitely expanded and we’re seeing fintech hubs set up across the wider country. Also, the regulatory environment here is increasingly supportive, particularly when you compare it to other geographies.”

Speaking from a founder’s point of view, Hema Gandhi, CEO of LatentBridge, agreed. “The UK has a lot of benefits, from government policies to the talent pool here, not just in technology, but in RegTech and LegalTech,” she said.

“It is also a lot more open from an international standpoint, so that is definitely a big advantage here.”

She also praised the Financial Conduct Authority’s sandbox environment, which provides innovators, both incumbents and new players, with access to regulatory expertise, allowing them to test products and services in a controlled environment.


In terms of the industry itself, there is still work to be done: the report showed that in 2021, female-founded and female-led fintechs represented 9% of all VC activity in UK fintech. In 2022 investment into female-driven fintech dropped to $616 million across 39 deals, representing just 4.9% of total investments in UK fintech.

Kevin Chong, co-head of Outward VC, said: “We've got a long way to go in terms of diversity and it's not just fintech, it's across venture capital and tech start-ups, and in gender, ethnicity and social mobility. There's just not enough diversity in any of those areas.

“Addressing that issue starts with tracking and reporting, so I hope we can do more of that.”

The panellists also flagged the other challenges in the UK market, including Hema Gandhi, who suggested that UK investors could be more bold.

“I find UK investors are cautious, and that you get a more straightforward approach from the US investor standpoint,” she said, stressing the need for a more emboldened support.

Tim Levene also said the UK suffers from its lack of a sovereign wealth fund, calling it a “huge missed opportunity”.

Future growth

Overall, the Innovate Finance report, and the panellists at the event, were optimistic about the growth of the fintech sector as a whole this year, in line with an improving picture in other areas of financial services.

The report highlighted that the fintech sector shows signs of maturing, compared to other sectors and IPOs, because of strong levels of M&A. It found that if investment levels in fintech continue to follow the same cyclical trajectory as private equity, M&A and IPOs have done for decades, it is likely that fintech investment may fluctuate throughout 2023 before ultimately making a comeback later in 2024.

Axe Ali said the UK has been a mature market for some time, and he was interested to see where the next evolution of fintech investment would come from.

“I think we’ll see fintech investment moving beyond the traditional verticals - payments and so on - into other areas, and that’s where we’ll see the next level of maturation.”

Tim Levene said he thought UK PLC had “taken a battering” in recent years, but that fintech was well placed to bounce back.

“One of the shining lights has been our tech sector and our fintechsector in particular - I think we have an inbuilt competitive advantage,” he said, pointing to the City of London as an historic financial centre.

Kevin Chong agreed, calling London a “world class” place to launch a fintech company.

I think the UK remains in a very strong position,” he said. “We've had Brexit, we had a pandemic, we had global recessions, and we've still more or less kept up with investment rates. I think that is testament to the strength of the system.

Kevin Chong, Co-head, Outward VC

Innovate Finance’s report concluded that although there have been adjustments to the market, investors and entrepreneurs remain “cautiously optimistic”. Uncertainty breeds new opportunities, it pointed out, and necessity is the mother of invention.

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