Pulse of Fintech H1 2022

UK fintech investment drops to £8.1 billion in H1 2022 – down 65 percent in a year

The optimism that permeated the fintech market at the end of 2021 quickly transformed into concerns about a potential recession in H1’22. Geopolitical uncertainty, turbulent public markets, ongoing supply chain disruption, high levels of inflation and increasing interest rates have all contributed to more subdued levels of UK fintech investment compared to the record highs experienced in 2021.

Total UK fintech investment dropped to £8.1 billion in the first half of 2022, which was down almost threefold from £23.4 billion in the same period in 2021. 262 UK M&A, Private Equity (PE) and Venture Capital (VC) fintech deals were completed in the first half of 2022, which was down from 341 in H1 2021.

However, despite a slowdown in investment compared to last year, H1 2022’s figure remains above the H1 2020 and H1 2019 figures. Last year’s investment total was strengthened significantly by the size of many of the deals, which included the £12.5 billion Refinitiv deal in January 2021. Taking out 2021’s outlier results, such as the Refinitiv deal, the drop in UK fintech investment is not nearly as significant and is well above H1 2019’s figure of £3.2 billion. Five out of the ten largest fintech deals in H1 2022 in the EMEA region were completed in the UK.

Hannah Dobson

UK Fintech Lead and Partner, Indirect Tax

KPMG in the UK

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Global highlights

Total global fintech funding across M&A, PE and VC reached £90.8 billion across 2,980 deals in H1 2022, which fell from £93.6 billion across 3,372 deals in H2’21, mirroring the decline in investment experienced in the broader technology sector. Total fintech investment and deals volume declined in both the Americas and EMEA regions, while the Asia-Pacific region attracted a new annual high of fintech investment amidst a decline in the number of deals.

Total global investment activity (VC, PE and M&A) in fintech 2019 – 2022

Source: Pulse of Fintech H1'22, Global Analysis of Investment in Fintech, KPMG International (data provided by PitchBook), *as of 30 June 2022.

While VC investment globally declined from £56 billion in H2’21 to £44.3 billion in H1’22, compared to all periods outside of 2021, the amount was incredibly robust. The Americas attracted the largest amount of VC funding (£22.9 billion) and EMEA saw a new record high level of funding for a 6-month period (£14 billion).

Venture activity in fintech in EMEA 2019 – 2022

Source: Pulse of Fintech H1'22, Global Analysis of Investment in Fintech, KPMG International (data provided by PitchBook), *as of 30 June 2022.

Sub-sector breakdown

Payments continued to attract the most funding among fintech sub-sectors globally, accounting for £36.7 billion in investment compared to the £50.8 billion seen during all of 2021. The acquisition of Australia-based Afterpay by Block (formerly Square) for £23.5 billion accounted for the largest payments deal of the quarter —and the largest fintech deal globally during H1’22.

Total global investment activity (VC, PE and M&A) in payments 2019 – 2022

Source: Pulse of Fintech H1'22, Global Analysis of Investment in Fintech, KPMG International (data provided by PitchBook), *as of 30 June 2022.

Crypto-focused companies attracted £12 billion during H1’22, including a £0.9 billion raise by Germany-based Trade Republic in June. Investment in the insurtech sector dropped considerably, with £3.2 billion of investment globally during H1’22 —well off pace to match the £12.5 billion in investment seen during 2021. Compared to a number of other areas of fintech, global investment in regtech showed strong resilience in H1’22. Globally, regtech companies attracted £4.7 billion in investment across 157 deals —following a similar trajectory to the level of investment seen in 2021.

Total global investment activity (VC, PE and M&A) in regtech 2019 – 2022

Source: Pulse of Fintech H1'22, Global Analysis of Investment in Fintech, KPMG International (data provided by PitchBook), *as of 30 June 2022.

Despite a slowdown in UK fintech investment compared to last year, the UK remains at the centre of European fintech innovation with UK fintechs attracting more funding than those in France, Germany, China, Brazil and Canada combined. Similar to the UK, the EMEA fintech market also experienced a slight drop in investment in the first half of 2022 with £22.3 billion of investment across the region, down from £26.6 billion in the second half of 2021. The decline was mainly driven by a fall in M&A deal value, which sank from £13.1 billion in H2’21 to £6.1 billion in H1’22. Regtech has been a particularly hot sector in the EMEA region in the last few months. In the wake of the conflict in Ukraine, there has been strong interest in anti-money laundering applications as banks seek to comply with sanctions, embargos and other regulatory measures.

John Hallsworth

Head of Fintech and Innovation in FS

KPMG in the UK

What can we expect in the second half of 2022?

Taking out 2021’s outlier results, fintech investment in the UK remained fairly positive in H1’22. The diversity of fintech sub-sectors could help to keep investment in the space relatively robust in the near-term, despite the uncertainty permeating in the market which is expected to continue into H2’22.

All currency figures converted from US$ to UK£ using the conversion rate as of 19 August 2022.

Download the full copy of the Pulse of Fintech report below.

Pulse of Fintech H1’22

An overview of the fintech landscape through analyses of global and regional fintech investments, and key trends and developments within fintech and financial services.

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