Fintech funding in Europe falls 37%

New data released by an industry body reveals a significant decrease in funding for UK fintech firms during the first six months of 2023. The total amount raised by these companies reached $2.9 billion, marking a 37 percent decline compared to the latter half of the previous year.

The dip in funding has been accompanied by a decrease in investment activity. Out of the 199 deals that took place in the first quarter of this year, only £2 billion were secured, reflecting the prevailing market uncertainty.

This trend is not unique to the UK, as global FinTech funding has also experienced a downturn. In the second half of 2022, there were 2,500 deals amounting to a capital investment of $31.7 billion. However, in the first half of 2023, the number of deals decreased to 1,714, with a total worth of $27.3 billion.

The decline in funding and investment follows a challenging 12 months for global fintech funding, as investors have become more cautious about supporting high-growth start-ups that have yet to turn a profit. Turbulent market conditions have contributed to this shift in investor sentiment.

Wayne Johnson, CEO & Co-Founder of Encompass Corporation, emphasised the importance of building investor confidence in the FinTech sector, particularly given the rapid evolution of technology. Johnson stressed the need for driving efficiency in banks through automation technology, which can enhance processes and contribute to the UK’s aspiration of becoming a science and technology superpower. He also highlighted the role of technology, such as Know Your Customer (KYC) process automation, in fighting financial crime and promoting continuous compliance.

Steven Mooney, CEO of FundMyPitch, underscored the crucial role of funding for small and medium-sized enterprises (SMEs) in achieving economic stability and future growth. He emphasised that providing financial support to SMEs, especially in sectors like FinTech, is vital for driving innovation and attracting international investment. Mooney urged prioritising accessibility to finance for businesses and offering tools and platforms that facilitate funding, ultimately fostering the growth of sectors like FinTech and strengthening international relations.

The decline in UK FinTech funding and investment underscores the need for concerted efforts to boost investor confidence, support SMEs, and drive technological advancements in the financial sector.