A bi-annual report on fintech investment trends has uncovered that total UK fintech investment has nearly tripled so far this year, hitting $7.3bn (£5.7bn~) in H1 2024, compared to $2.5bn (£2bn~) in H1 2023.

However, despite the almost threefold increase, high levels of inflation, the high interest rate environment, and geopolitical uncertainty have all contributed to more subdued levels of UK fintech investment compared to 2021’s record highs.

KPMG’s latest Pulse of Fintech report discovered that H1 24’s investment total was largely bolstered by the size of many of the deals, not least the $4bn (£3.1bn~) buyout of financial software company IRIS Software Group by Leonard Green, and the $999m (£800m~) VC round by Abound, the loan provider.

In total, 198 UK merger and acquisition, private equity, and venture capital fintech deals were completed in H1 2024, down from 284 in H1 2023. That said, the UK still remains the centre of European fintech investment, with British fintechs attracting more funding than their counterparts in the rest of Europe, Middle East, and Africa (EMEA) combined.

Comparatively, the EMEA region saw total fintech investment drop considerably in the first half of 2024, falling from $19.1bn (£15bn~) in H2 23 to $11.4bn (£9bn~) in H1 24. The largest EMEA deals outside of the UK included the buyout of payments firm Banco BPM Gruppo for $652m (£513m~), and the acquisition of Switzerland-based e-invoicing company, Pagero, by Thomson Reuters.

The Americas also saw a comparative dip in investment, with total investment falling from $38.5bn (£30bn~) to $36.6 billion (£28.8bn~) between H2 23 and H1 24, including from $35bn (£27.5bn~) to $27.4b (£21.5bn~) in the US.

Speaking on the report and the findings, Hannah Dobson, partner and UK head of fintech at KPMG UK, said: “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.

“We are expecting to see growing investment interest in AI and its use in the fintech and regtech space. Regulation remains a key focus in the EU – particularly with crypto and digital asset businesses as they navigate the new EU’s Markets in Crypto Assets (MiCA) regulation, which is expected to arrive in December 2024.”

Recommended reading

• After Years, Revolut Gets Its UK Banking Licence
• FCA to Protect Access to Cash Amid Bank Branch Closures
• FinTech Scotland Festival Reveals 2024 Programme

Karim Haji, UK and global head of financial services at KPMG, added: “The high cost of capital and geopolitical uncertainty – linked to conflict and elections, have put a significant damper on all global investments so far this year, and the fintech market isn’t immune to that.

“Investors are acting cautiously, and not only when it comes to large transactions. On the M&A front, in particular, given concerns about valuations and the profitability of potential targets, investors are focussed on improving the companies they already own rather than buying new.”