The global picture
Global investment in fintech stood at $51.8 billion (around £39.2 billion) in the first half of 2024, according to the figures from KPMG. This is down 18% from $62.3 billion in the previous six month period and the lowest level of fintech investment recorded by KPMG since the first half of 2020.
Karim Haji, global head of financial services at KPMG International, explained that the high cost of capital and geopolitical uncertainty had put a “significant damper” on investment.
“Investors are acting cautiously, not only when it comes to large transactions, particularly on the [mergers and acquisitions] front, given concerns about valuations and the profitability of potential targets, investors are focused on improving the companies they already own rather than buying new,” Haji said.
All regions saw fintech investment slide against the previous six months. In the Americas, total investment dipped 5% to $36.8 billion from $38.6 billion, while in the Asia Pacific region it fell 22% to $3.6 billion from $4.6 billion. Europe, Middle East and Africa (EMEA) saw the largest drop half-on-half. Total investment in the EMEA region slid 40% to $11.4 billion from $19.1 billion as a high interest rate environment kept investment activity subdued.
Fintech investment in the UK
The UK accounted for the largest share of fintech investment in the EMEA region, representing 64% of its total investment. The UK’s strong performance was driven by several significant deals including the $4 billion buyout of financial software company IRIS Software Group by Leonard Green, the $999 million VC raise by SMB marketplace platform Abound, and a $621 million raise by neobank Monzo.
Total fintech investment in the UK hit $7.3 billion in the first half of 2024, up from $2.5 billion in the same period in 2023. UK dealmaking volumes struggled, however.
198 UK mergers and acquisitions, private equity and venture capital fintech deals were completed in the first half of 2024, down from 284 in the first half of 2023. Despite the fall in the total number of deals, KPMG noted that the UK remains the centre of European fintech investment with British fintechs attracting more funding than their counterparts in the rest of EMEA combined.
“The UK fintech market continues to be dominated by the payments sector and the growing adoption and use of the services of challenger banks. Previously struggling to gain the trust of customers, these challenger banks now lead the way in banking innovation and agility, and we expect their growth to continue,” commented Hannah Dobson, Partner & Co-Lead of Fintech at KPMG UK.
“With the new UK government in situ and the potential long awaited drop in interest rates having finally arrived, there are hopes that fintech investment will start to show signs of recovery as we move into the latter part of the year and early 2025,” Dobson continued.