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UK fintech investments recovering from lost year
Fintech investments have bounced back in the first half of this year after a Covid-19-hit 2020
Investment in the UK financial technology (fintech) sector is recovering strongly after hitting the brakes in 2020 amid the global economic shock brought on by the Covid-19 pandemic.
Latest figures from Innovate Finance reveal that investment in UK fintech was $5.7bn (£4.1bn) in the first six months of 2021, which is more than in the whole of 2020, when $4.3bn was invested.
Economic uncertainties during the pandemic caused a pause in fintech investments. For example, this time last year, the UK fintech trade body released numbers that showed only $760m was invested in UK fintech in the second quarter of 2020, compared with more than $1.2bn (£940m) in the same quarter in 2019.
However, the restrictions imposed during the pandemic to mitigate Covid’s spread actually increased the number of consumers using fintech services, such as mobile banking. With bank branches and shops closed and people advised to reduce physical contact, digital financial services saw increased take-up.
Investors are now responding, with 13 UK fintech companies closing mega deals, where investment exceeded $100m, in the first half of this year. This was more than the whole of 2019 when the record was last set at 10 mega deals.
SaltPay ($500m), Checkout.com ($450m) and Starling Bank ($376m), were among the 13 that received these huge investments.
By comparison, during the same six-month period, the US saw 940 deals worth $26.7bn, the fintech sector in Brazil received $3bn in 40 deals, and 56 deals were closed in Germany worth $2.5bn.
Read more about UK fintech
- The importance of immigrant workers to the UK’s fintech sector highlighted by government planned fintech visa.
- Less-established fintechs have been hit the hardest by the drop in investment capital, but there is light ahead for those that survive.
- The UK government faces a ‘now or never’ moment if it wants financial technology to play a central role in the economy for years to come.
Janine Hirt, CEO of Innovate Finance, who recently replaced Charlotte Crosswell, said: “This analysis clearly demonstrates that the appetite among international investors to fund high-growth, innovative firms has never been greater, and is a testament to the UK’s position as a world leader in fintech.
“Fintech is one of the fastest-growing sectors of our economy and has a vital role to play in the UK’s economic and business recovery. To have secured record funding – in just six months – speaks to an enduring confidence in UK innovation, as well as our ability to build and scale world-class businesses.”
Hirt added: “It is hugely encouraging to see evidence of this resilience and growth, particularly in light of the uncertainty and challenges brought on by 2020. Both the flow of capital and a wide talent pool are essential to maintaining the sector’s strength, and we remain committed to supporting efforts in these vital areas.”
The UK is pinning its hopes on fintech as an industry of the future. A Treasury-commissioned review of the UK’s future in fintech told the government in February that it must urgently introduce effective policies in five key areas if the fintech industry is to continue to thrive.
The review, carried out by Ron Kalifa, chairman of fintech giant Worldpay, set out the steps that the UK must take if it is to remain one of the world’s leading fintech locations. It recommended upskilling Brits in the ways of fintech and fast-tracking foreign talent, dispersing fintech innovation from London across the country, and increasing funding for fintechs at all stages in their lifecycles.