Tracxn, a leading global SaaS-based market intelligence platform, has released its Fintech UK Report. The report, based on Tracxn’s extensive database, provides insights into the UK’s Fintech space.

The UK has been one of the top Fintech centres and has even been dubbed the global Fintech capital. In terms of startup funding, Fintech is the leading segment in the country. 

Total funding into Fintech startups in the UK fell 13% to $11.2 billion in 2022 from $12.9 billion in 2021. This was largely due to a sharp 26% drop in late-stage funding to $7.2 billion in 2022 from $9.8 billion in 2021. Early-stage investments rose sharply by 34% to $3.4 billion this year, compared with $2.6 billion last year.

The average ticket size for seed-stage investments increased by 26%, while the average ticket size for early-stage funding has increased by 76% in 2022, compared with 2021. The number of $100 million+ funding rounds fell by 34% to 23 rounds in 2022 from 35 rounds in 2021. 

Q1 of 2022 witnessed the highest-ever funding in the UK Fintech sector, after which investments started to decline. The total funding fell by 66.7% from $8.4 billion in H1 to $2.8 billion in H2 of 2022. This plunge in investments was mainly due to the ongoing war, which has increased the cost of energy and other dependent products and caused a slowdown in economic activity across the region. However, the UK's Fintech sector is doing relatively better in terms of funding, when compared with countries such as the US, China, and India.

Y Combinator, SFC Capital, and Development Bank of Wales are the top seed-stage investors in the space, while the top early-stage Investors are Octopus Ventures, Force Over Mass, and LocalGlobe. The leading late-stage investors are Dawn Capital, BlackRock, and Toscafund Asset Management.

Wealth management tech company FNZ, which raised $1.4 billion from Motive Partners and the Canada Pension Plan Investment Board in a private equity round, recorded the highest funding round in 2022.

There were fewer new entrants to the Unicorn club this year, with only 6 companies joining the list, compared with 14 in 2021. InsurTech company Ondo was the only IPO from the Fintech space in 2022, a far cry from 8 IPOs in 2021. 

Payments, Investment Tech, Cryptocurrencies, and Banking Tech were the top-performing business models in terms of funding in 2022. Despite being the top-performing sectors, Banking Tech and Payments sectors have seen a drop in funding of 55.7% and 31.4% respectively, when compared with 2021. This was due to rising inflation, which is restricting consumers from spending on services that are not absolutely necessary. 

In 2022, the Investment Tech and Cryptocurrencies sectors saw a massive rise of 206.6% and 107% respectively from 2021. In Europe, the UK is currently the largest market for cryptocurrencies in terms of the transaction value. This has made the UK an attractive investment opportunity for investors looking to venture in this space. 

The UK government has taken measures to make the UK a global hub for crypto asset technology. This provides power to the government to regulate activities related to crypto assets. This includes limits on foreign companies selling into the UK, restrictions on advertising on crypto products, and provisions on how to deal with collapsed companies. This regulatory framework will encourage investment into the sector and build trust among consumers. 

In terms of total funding till date, London has attracted the maximum investment ($43 billion), followed by Edinburgh ($1.5 billion) and Blyth ($731 million).