Since 2012, fintech investment has been on a downward trend, but we might finally see some signs of recovery in the latter half of this year. Last year, investment in UK fintech dropped by over 25%, but according to KPMG, there’s hope for a rebound. Their latest report highlights that UK companies attracted $9.9 billion (£7.8 billion) in 2024. In contrast, total fintech investment for the year reached $20.3 billion, down from $27.6 billion in 2023.
KPMG’s “Pulse of Fintech” report noted that UK fintech investment fell to $9.9 billion in 2024, a 27% decrease from $13.6 billion in 2023. Hannah Dobson, the UK head of fintech at KPMG, anticipates that the first half of this year might still feel “relatively soft.” However, she believes interest rates will start to drop, likely leading to a pickup in investments during the third and fourth quarters.
Chris Skinner, CEO of The Finanser, echoed the sentiment, stating that these are challenging times for fintech. He pointed out that while the sector thrived in the 2010s, the 2020s have proven tough. Investment plummeted by 48% in 2023 compared to 2022, which itself was a rough year, and projections for 2024 are not promising either.
KPMG attributes the decline to geopolitical instability, high inflation, and elevated interest rates. Dobson mentioned that 2024 has been yet another difficult year for investments, resulting in business failures and consolidations. This climate has also prompted a stronger focus on profitability and cost control, which could set the stage for more sustainable businesses in the future.
Across EMEA, and especially in the UK, there are hints of a gradual recovery as interest rates decrease and political stability improves. However, fintechs in the region still face regulatory challenges with new EU and UK laws emerging around AI and Buy Now, Pay Later services.
The biggest fintech deal in Europe for 2024 involved the sale of online bank Knab to Bawag Group for $560.6 million. In the UK, the largest investment was a $267 million venture funding round for money transfer service Zepz.
Globally, fintech also experienced a downturn, reaching a seven-year low in investment with $95 billion in 2024 compared to $113.7 billion in 2023. Karim Haji, global and UK head of financial services at KPMG, did share some positive insights, highlighting that payments remained strong, driven by late-stage deals and a focus on consolidation. Regulatory technology also gained traction.
Global investment in payments reached $31 billion in 2024, rising from $17.2 billion the previous year. Haji noted that while we are beginning to see more deals due to interest rate cuts, the ongoing impacts of fluctuating global trading conditions on inflation and interest rates remain uncertain.
KPMG’s findings align with those from Innovate Finance, which reported a 37% investment decline this year compared to last. They cited challenging market conditions, including rising interest rates and geopolitical instability, along with a shift in venture capital fundraising trends.