UK fintech funding fell 63% in 2023, new Tracxn report finds
Despite being home to nearly 10% of the world’s fintech community, the UK has experienced a significant drop in fintech funding activity for the second year in a row, according to the new geo annual report from Tracxn.
UK fintech funding fell 63% in 2023, finds Tracxn
Although it accommodates a healthy start-up ecosystem for fintechs in terms of talent, service concentration and forward-thinking legislation, the report says the UK nonetheless endured a 63% decline in the total amount of funding raised by fintechs in 2023, with latest figures standing at $4.2 billion.
It is a far cry from the $11.2 billion raised in 2022, and marks a 70% drop in the amount of funds raised in 2021.
The report attributes this downturn to decreased activity in both late-stage and early-stage investments. Late-stage funding accounted for $2.7 billion of the total raised last year, down 60% YoY, while early-stage funding tumbled 68% to $1.2 billion.
Despite the drop in funding however, the report still identifies the UK as the second most-funded market behind the USA.
Round quantity decreases
Having evaluated the decrease in funding round totals, Tracxn also addresses how the quantity of these rounds has taken a similar downturn. The report indicates that between 2022 and 2023, the number of funding rounds for UK fintechs decreased 42%, from 418 to 241 respectively.
Furthermore, only nine rounds throughout the entire year managed to raise $100 million or more, compared to to 25 such rounds the year previous.
Those to achieve this feat include lender Abound’s $602 million raise in March, and data and analytics software company Quantexa’s $129 million raise the following month.
Top segments for funding
The report identifies banking technology, cryptocurrencies and alternative lending as the three top performing industry segments last year by way of funding.
Yet despite their industry prominence, all three segments failed to attract the same level of funding as experienced in previous years.
According to the data, the largest YoY decrease was met by the cryptocurrency sector, with the $1.9 billion investment it was able to attract in 2022 tumbling 54% to $866 million last year.
Banking technology’s poor performance trails closely behind, with a 53% YoY drop from $1.9 billion to $880 million, while the alternative lending sector endures a slightly shallower decline of 42% from $1.5 billion to $865 million.
The place to be
The report also analyses where most of this investment landed. Perhaps unsurprisingly, London-based fintechs managed to attract the largest investments for the fifth year in a row.
With 81% of the country’s total funding to its name, London enjoyed fintech investments totalling $3.5 billion in 2023, followed by the $150 million received by Colchester in Essex, and the $122 million received by Blyth in Northumberland.
The English capital’s consistency in being able to attract high levels of investment makes it now the second-largest globally funded city in this industry, after San Francisco, USA.
This status as been accelerated by the efforts of the UK government to better accommodate the needs of the fintech sector, most notably through its “FinTech for Gov” initiative set out in March, which encourages the use of the technology within its own financial departments.
Elsewhere, it has also worked to establish a centre of excellence in a bid to cultivate sector-wide collaboration, opportunities and public awareness.
