Specifically, across 199 deals, a total of $2.9 billion (£2.3bn~) was invested in the UK fintechs in the first half of 2023. This represents a drop of 37% when compared to the second half of 2022.

Of those 199 deals, 111 of them took place in the first quarter of 2023, equating to $2bn (£1.6bn~) of capital invested. In the second quarter, 88 deals took place, worth $864 million (£677m~).

Further, London was found to be the location where the vast majority of fintech funding was placed, attaining 91% of all UK fintech funding.

Innovate Finance’s report suggests that the slowdown isn’t unexpected, however. Venture capital investors predicted a downtrend in the industry body’s 2022 Innovate Finance Summer Report and, since the first quarter of 2022, there have been five consecutive quarters of reduced investment.

On this, Janine Hirt, the CEO of Innovate Finance, said: “The drop in global and UK FinTech investment is an expected result of the current economic landscape, reflecting the cautious investor sentiment as seen across equity markets over the last 12 months.”

Despite such headwinds, the UK retains its place as the second best market globally for fintech investment, only behind the U.S which had $15.6bn (£12.2bn~) invested across 663 deals.

In Europe, the UK retains its leading position. In second spot is France with $728m (£570m~) across 41 deals, followed by Germany with $536m (£420m~) across 33 deals, and then followed by Switzerland, the Netherlands, Sweden, Spain, Estonia, Ireland, and Denmark in the top ten.

Recommended

• How Has One of Scotland’s Most Influential Tech Investors Evolved?
• Meta’s Threads Hits 100 Million Users in Five Days
• Orbex Expands Facilities Ahead of UK Vertical Rocket Launch

One particular facet highlighted in the FinTech Investment Landscape H1 2023 report is the noticeable gender gap when it comes to fintech funding.

Specifically, the H1-focused report found that female founded or co-founded fintech companies represent a mere 2.2% of investment in the UK. In the full year of 2022, the figure was 4.9%.

On this, the report’s authors noted “there remain key areas where improvement is crucial, including the funding of diverse innovators. Female-founded or co-founded companies make an ever smaller proportion of the UK FinTech landscape.”

In terms of how fintech funding could play out in the latter half of 2023 and beyond, the report’s authors stated that “investors and startups alike are watching the second half of 2023 for indicators of economic recovery and lower inflation rates in order to pick up the pace of investment in 2024.”

To read Innovate Finance’s latest report in full, click here.