Fintech investment has been on a downward spiral since 2012, but the second half of this year could see the first shoots of recovery.
Investment in UK fintechs fell by over a quarter last year, but there are signs that a recovery could be on its way, according to KPMG.
In its latest report into EMEA fintech investment trends, KPMG revealed that 2024 saw UK firms receive $9.9bn (£7.8bn). Meanwhile, total investment in 2024 was $20.3bn compared with $27.6bn the previous year.
Total UK fintech investment dropped to $9.9bn in 2024, down 27% from $13.6bn in 2023, according to KPMG’s Pulse of fintech report.
Hannah Dobson, partner and UK head of fintech at KPMG, said UK investment is expected to remain “relatively soft” in the first half of this year, but added that “it will likely begin to pick up as interest rates reduce further, with common consensus that this will be in the third and fourth quarters”.
Fintech industry expert Chris Skinner, CEO at The Finanser, told Computer Weekly that “times are hard in the fintech space”. “Fintechs had an amazing ride in the 2010s, but in the 2020s, it seems not,” he said. “Fintech took a hammering in 2023, with investing down 48% compared with 2022, which was also a bad year, and now we move into 2025 and reflect on 2024, where it went down even more.”
In its report, KPMG said geopolitical uncertainty, high levels of inflation and the higher interest rates all contributed to “more subdued levels of UK fintech investment”.
Dobson at KPMG added: “2024 was another tough year for fintech investment, which inevitably has led to some business failure and some consolidation. It has also sharpened the focus on a path to profit and cost control which positively leads to more sustainable saleable businesses in the longer term.”
In EMEA, and particularly the UK, there are signs of a slow recovery in deals as the reduction in interest rates and more political stability leads to better certainty. The impact of regulation is an ongoing challenge for fintechs across EMEA as they face into new EU and UK regimes in areas such as AI and BNPL.
The largest fintech deal in Europe in 2024 was the $560.6m sale of online bank Knab, to Austrian financial firm Bawag Group. The largest deal in the UK was the $267m venture funding round by money transfer provider Zepz.
It’s not just Europe that saw a fall in investment. Globally, fintech hit a seven-year low last year, with $95bn invested compared with $113.7bn in 2023.
Karim Haji, global and UK head of financial services at KPMG, said there are some “bright spots”.
“Payments continued to be the rockstar of the fintech subsectors, driven by late-stage deals and an increasing focus on consolidation, and regtech gained a lot of traction,” said Haji.
Global investment
Global investment in the payments space hit $31bn in 2024, up from $17.2bn in 2023.
Haji added that while more deals are beginning to come through because of interest rate cuts in different jurisdictions and the lower cost of funding, the impacts of changing world trading conditions on inflation, interest rates and the market change are yet to be known.
KPMG’s figures mirror those published by Innovative Finance last month, which reported a 37% fall in investment in 2024 compared with 2023.
Innovate Finance, the industry body for fintech in the UK, blamed tough market conditions that included “rising interest rates, geopolitical instability, as well as a recalibration in venture capital fundraising”.