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

H1’24’s investment total was strengthened significantly by the size of many of the deals, including the $4bn buyout of financial software company IRIS Software Group by Leonard Green, a $999 million VC round by small business-focused marketplace platform Abound, and a $621m raise by neobank Monzo. Taking out H1’24’s outlier results, such as the IRIS Software Group deal, UK fintech investment fell to $1.8bn in H1’24.

198 UK M&A, PE and VC fintech deals were completed in H1 2024, down from 284 in H1 2023. Despite the fall in the total number of deals, the UK remains the centre of European fintech investment, with British fintechs attracting more funding than their counterparts in the rest of EMEA combined.

The Europe, Middle East and Africa (EMEA) region saw total fintech investment drop considerably in the first half of 2024, falling from $19.1bn in H2’23 to $11.4bn in H1’24.

The largest EMEA deals outside of the UK included the buyout of payments firm Banco BPM Gruppo for $652m, and the acquisition of Switzerland-based e-invoicing company Pagero by Thomson Reuters.

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.”

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.”