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UK keeps fintech hub status despite global funding decline, according to report

The UAE and Hong Kong were last year's fastest growing fintech hubs but the US and UK still dominate

Arik Shtilman Rapyd

Arik Shtilman/Rapyd

The UK fintech scene saw funding from venture capitalists decline nearly two-thirds in 2023 compared with the previous year.

In total, according to trade body Innovate Finance, $5.1bn of investment was received by UK-based fintech companies. The figure is 65 per cent lower than in 2022 when $14.6bn was pumped into fintechs in the UK.

In 2023 there were just 409 UK fintech deals compared with 592 deals in 2022 as global macroeconomic uncertainty and other financial challenges hit investment and deal-making confidence.

“While economic headwinds presented a significant challenge for FinTechs globally in 2023, it is encouraging to see how the UK fintech sector has shown great resilience by maintaining its position as a global hub for investment, second in the world behind only the US, and maintaining the leading position in Europe," Janine Hirt, CEO of Innovate Finance, said.

Globally, fintech funding was down to $51bn in 2023, a decrease of 48 per cent from 2022.

However while there were notable drops in the likes of France, and Germany (of 56 per cent and 66 per cent) respectively elswhere there was strong growth. The UAE rose from 24th to 6th position and Hong Kong from 27th to 9th position in the global rankings.

While the stark decline in funding levels overall is alarming, many fintechs continued to raise cash and/or grow revenues sufficiently to reach profitability.

For example, UK-based Rapyd snapped up rival PayU GPO for $610m to bolster its global expansion.

 “The data demonstrates a clear opportunity for UK fintechs to strengthen ties with rapidly growing markets in Asia - many of which entered the global Top 10 for the first time, and saw more combined investment than the European counterparts. The UK’s mature fintech sector is well placed to develop stronger collaboration with the region, and create new commercial and scaling opportunities," Hirt added.

The second half of 2023 saw an improvement in sentiment for fintech.

“We remain confident the momentum of high-profile deals we saw in Q4 will continue well into 2024, as we anticipate a boost to the wider market. We are focused on working with industry, government and regulators, to maintain the UK’s leadership and ensure the necessary support, including proactive regulation, is in place for the UK to attract investment from seed stage to higher levels of critical growth funding,” Hirt said.

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