Investment in UK financial technology (fintech) was seven times higher in 2021 than in the previous year, boosted by a record number of deals.
According to KPMG’s latest report, UK fintech investment increased from $5.2bn in 2020 to a “staggering” $37.3bn (£27.5bn) last year.
There were 603 private equity, venture capital and merger and acquisition deals in the sector in 2021, compared with 470 in 2020 – a 28% increase. There were a significant number of large deals, including the $14.8bn Refinitiv deal in January 2021, when the London Stock Exchange took it over.
Last year was “incredibly strong” for the UK fintech industry, said Karim Haji, UK head of financial services at KPMG. “The UK remains at the centre of European fintech investment, with British fintechs attracting more funding than their counterparts in the rest of EMEA [Europe, Middle East and Africa] combined,” he added.
Haji said fintechs are strategically important for the UK’s economic growth prospects, adding: “It is vital that the ongoing work to nurture them continues if the UK is to remain a magnet for investment.”
Total global investment in fintech reached $210bn in 2021, with $88bn into the US, the largest global fintech sector. The EMEA fintech market also performing strongly. In the region, $77bn was invested in fintech last year, with record levels of investment the Nordics ($18.5bn), Germany ($5.4bn), Ireland ($1.6bn), Africa ($1.8bn) and Israel ($900m).
Globally, payments fintech accounted for nearly a quarter of total investment, at $51.7bn in 2021, compared with $29.1bn in the previous 12 months. KPMG said the payments segment of fintech was boosted by increasing interest in offerings such as buy now, pay later, and open banking-based products and services.
But Anton Ruddenklau, global fintech leader at KPMG International, said investments were across the board. “We’re seeing an incredible amount of interest in all manner of fintech companies, with record funding in areas like blockchain and crypto, cyber security and wealthtech,” he said. “While payments remains a significant driver of fintech activity, the sector is broadening every day.”
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According to KPMG, blockchain and crypto fintechs received $30.2bn, cyber security $4.85bn and wealthtech $1.62bn last year.
Anders la Cour, CEO at fintech Banking Circle Group, said the figures are good news for the UK after a government-commissioned report this time last year, carried out by Ron Kalifa, chairman of fintech giant Worldpay, warned the government to urgently create policies to ensure the UK retains its strong position in global fintech.
“Almost a year ago, the Kalifa report revealed that the UK was at risk of losing its trailblazing position in the fintech world,” he said. “Fast forward 12 months and fintech investment topped an impressive £27.5bn, demonstrating that the UK has held firmly onto its crown. This is a massive win for not just the UK, but Europe and the rest of the world. This sort of investment drives competition and innovation forward.”
La Cour added: “Digital transformation in financial services is currently at a tipping point, with technology being used to empower banks, payments businesses and financial institutions all over the globe. KPMG’s latest data proves that this trend is set to carry on in 2022, so it’s an incredibly exciting time to be in fintech right now.”