UK FinTech Funding: A Report on the State of the Industry in 2022

The FinTech industry in the UK experienced a decline in funding in 2022, according to a report by Tracxn.

The report analyzed the state of the FinTech industry in the UK and revealed that private FinTech firms raised a total of $11.2 billion in 2022, a drop of 13% from the previous year.

Decline in Late-Stage Funding

One of the biggest contributors to the decline in FinTech funding was the 26% drop in late-stage funding. In 2022, late-stage rounds raised $7.2 billion compared to $9.8 billion in 2021.

On the other hand, early-stage investments in FinTechs increased by 34% to $3.4 billion from $2.6 billion in 2021.

Quarterly Funding Activity:

While the overall funding activity declined later in the year, the first quarter of 2022 delivered the highest funding ever recorded in the UK Fintech sector.

The total funding dropped by 66.7% from the first half of the year to the second half, with $8.4 billion raised in H1 and $2.8 billion raised at the back end of the year.

New Unicorns:

In 2022, six new FinTech firms reached unicorn status, compared to 14 new billion-dollar-plus firms in 2021.

The only IPO in the FinTech space in 2022 was by Insurtech Ondo, while eight firms went public in 2021.

Investment Trends:

The report also highlighted some investment trends in the FinTech industry. The average investment for seed-stage FinTechs increased by 26%, while the average ticket size for early-stage funding increased by 76% in 2022 compared with 2021.

On the other hand, the number of $100 million+ funding rounds fell by 34% to 23 rounds in 2022 from 35 rounds in 2021. The largest funding round in 2022 was raised by Wealthtech FNX, with a $1.4 billion round supported by Motive Partners and the Canada Pension Plan Investment Board.

Top Segments:

The top segments of FinTech in 2022 included Payments, Investment Tech, Cryptocurrencies, and Banking Tech.

While both Banking Tech and Payments experienced a drop in funding of 55.7% and 31.4%, respectively, compared with 2021, the Investment Tech and Cryptocurrencies sectors increased by 206.6% and 107%, respectively, from 2021.

Geographic Distribution:

London remains the largest FinTech market in the UK with $43 billion, followed by Edinburgh at $1.5 billion and Blyth at $731 million.

Despite the decline in funding, the report shows that the UK FinTech sector performed better than other jurisdictions like China, India, and the US. 

With a growing number of early-stage investments and the rise of new FinTech segments like Investment Tech and Cryptocurrencies, the future of the UK FinTech industry looks promising.