In the first half of 2022 total capital invested in FinTech globally reached $59 bn – flat year-on-year. The UK FinTech sector continues to grow with investment reaching $9.1bn – a 24% year-on-year increase from H1 2021.
The UK remains second globally in FinTech investment, behind the US.
On the back of a record-breaking 2021, the levels of investment in UK FinTech continue to increase despite global slowdown. Founders and enthusiasts were optimistic that FinTech investment would continue to hit previous records this year.
2022 has so far demonstrated that we continue to live in unprecedented times. Geopolitics have shown that tectonic shifts do not occur in a vacuum and the substantive reaction in the FinTech investment landscape is no exception.
Total capital invested in FinTech globally in the first half of 2022 reaches $59bn – flat year-on-year – across 3,046 deals analysed.
The global slowdown in investments comes with some notable exceptions, mainly the UK, which has reported a 24% growth in FinTech investment compared to the first half of 2021. While these results pale in comparison to the 217% YoY growth of UK FinTech last year, the country maintains its strong position as the second in the world for the amount invested, more than the rest of Europe combined.
Overall, the US received the most investment in the first half of 2022, bringing in $25bn in FinTech capital, with the UK firmly in second place with $9.1bn, rounded off by India ($3.9bn), Germany ($2.4bn) and France ($2.3bn).
It is fantastic to see that UK FinTechs are continuing to secure outstanding levels of investment - this is a testament to the strength of our ecosystem, including our innovative entrepreneurs and founders, strong and diverse talent pool, and a supportive government and regulatory framework.
“It is critical that we now keep up this momentum. The UK is currently receiving more investment in FinTech than all of Europe, second only in the world to the US. We must continue to work together - industry, government and regulators - to build on this leadership and ensure the UK remains the best place in the world to start, build and scale a FinTech business. This will positively impact not only the financial services sector but the entire population of the UK as a whole who will benefit from new, innovative, and more effective products that drive greater financial wellness.”
- Janine Hirt, CEO, Innovate Finance
The Global Landscape
The first quarter of 2022 showed promising results with $32.8 bn of investment across 1,754 deals, a 21% growth from Q1 of 2021 with $27.1 bn across 1,795 deals. However, in the second quarter of 2022 the rumoured ‘market correction’ became apparent. Q2 saw $26.3 bn across 1,291 deals compared to over $32.5 bn invested across 1,606 deals in Q2 2021, a 19% drop in capital invested. FinTech enthusiasts and founders warn about slower investment activity and declining valuations, and investorshave seen this coming.
According to Erik Mostenicky, Vice President at Fidelity International Strategic Ventures:
Internally we get insights as to what's happening in public markets. We look into publicly available data for equities and fixed income…and assess early signals of the market overheating, which we started to see December 2021. We saw signals of a correction of the public markets not only on tech side but public equities due to overvaluation.”
- Erik Mostenicky, Vice President, Fidelity International Strategic Ventures
Kevin Chong, Co-Head of Outward VC confirms that his firm-and many other VCs–calmly prepared for this moment.
One thing is clear [amongst all investors]: there is plenty of dry powder to invest. Though this recovery will be slow. Inflation takes time to fix [so we can expect] it to take a good two years for things to go back to ‘normal’… VCs are being more choosy and more concentrated. There is [simply] less appetite for growth at all costs” as in the past few years.”
- Kevin Chong, Co-Head, Outward VC
Jay Wilson, Investment Director at AlbionVC, remains optimistic about what fluctuating valuations imply for the market. He comments:
Good companies are started in good and bad economic cycles - the difference is just you pay for them. This [fintech venture] is the ultimate market of opportunity, there are still great companies that need funding out there and now is the time to potentially unlock a deal.”
- Jay Wilson, Investment Director, AlbionVC
By withholding and waiting, investors are optimistic that this year's global plateau presents opportunities for the FinTech sector to reach healthy maturation in the long-term.
Global Investment in Numbers
Halfway through 2022, global FinTech has brought in positive results but ones that do reflect a potential slowdown or maintenance from a very successful 2021. Last year witnessed $131 billion (£95 billion), which represented a 183% increase from 2020.
Global FinTech Investment, by half-year period:
FinTech investment had grown steadily from the $19.3 bn of 2017. The tremendous growth witnessed in 2021 prompted sceptics to suggest that a FinTech bubble would burst. Despite the plateau, this year's first half results demonstrate that FinTech is a core sector receiving a significant $59.2 bn in investments.
The Top 5 Deals globally brought $5.0 bn in capital alone, with FNZ taking the first spot with a $1.4 bn equity funding round with CPP. In a close no. 2, Trade Republic closed its Series C at $1.2 bn. Checkout.com secured $1 bn in its Series D, and Ramp and Coda Payments rounded out the Global Top 5 with $748 million and $690 million respectively.
$1.4 bn
United Kingdom
$1.2 bn
Germany
$1 bn
United Kingdom
$748 m
United States
$690 m
Singapore
The Top 10 Countries to host
the highest levels
of capital invested include:
| 1. United States | $25.1 bn |
| 2. United Kingdom | $9.1 bn |
| 3. India | $3.9 bn |
| 4. Germany | $2.4 bn |
| 5. France | $2.3 bn |
| 6. Singapore | $2.1 bn |
| 7. Indonesia | $1.3 bn |
| 8. Brazil | $1.2 bn |
| 9. Canada | $0.8 bn |
| 10. Australia | $0.6 bn |
While UK fintech grew 24% in the first half of 2022 compared to the same period in 2021, US FinTech shrank by 10%. Indonesia is a newcomer to the Global Top 10 list, with 5 Mega Deals (over $100 million) under its belt. Notable drops from the Top 10 included China which dropped from Number 9 in 2021 to Number 13 in 2022. Mexico dropped 13 places to Number 28 and the Netherlands dropped 14 places to Number 26.
The UK And Europe
In Europe, $17.6 bn was invested into European FinTech across 708 deals, a 10% increase compared to the same period of 2021.
However, such an increase has been driven by the positive growth in investment in UK FinTech. Excluding the UK, the rest of Europe was in fact down by 2% compared to the same period in 2021.
Venture activity in the UK is split evenly between early and later stages of deals (92 vs 93, respectively) with a further 73 deals announced at the seed stage and 17 growth and expansion deals.
The UK holds a strong grip on second place for global leadership in FinTech investment, outpacing third runner-up India by over $5 bn. While fewer UK deals have been reported in the first half of 2022 compared to the first half of 2021 (294 vs 375), the 2022 VC deals totalled $9.1bn in the first half versus $7.3bn in the same period in 2020, a 24% growth.
The UK firmly holds its spot as the top European FinTech Hub, followed by Germany and France.
The UK also firmly holds its spot as the top European FinTech Hub.
The Top 5 destinations include:
| 1. United Kingdom | $9.5 bn |
| 2. Germany | $2.4 bn |
| 3. France | $2.3 bn |
| 4. Sweden | $0.6 bn |
| 5. Italy | $0.6 bn |
The results of 2022 are behind the impressive growth figures of 2021, when UK FinTech investment skyrocketed 217% above the level of Covid-impacted 2020. Across all stages of venture (including growth & expansion deals), the UK has received $9.15 bn, compared to the $7.3 bn received in the first semester of 2021.
Gender investment gap widens in the UK
First half 2022 data on capital invested into UK female-driven FinTechs – FinTechs with a female founder or cofounder – suggests that the gender investment gap is widening.
In the first half of 2022, $376 million was invested into UK female-led FinTechs across 20 deals compared to $1.1 billion across 32 deals in the first half of 2021.
This indicates a drop in investment of 66% between H1 2021 and H1 2022.
In the first half of 2022, investment in UK female-led FinTechs represented only 4% of the total investments in UK FinTechs, down from 15% in the first half of 2021.
Last year, a total of $1.6 billion was invested into UK female-led FinTechs across 55 deals (full year numbers), indicating that there was already a slow down in investment into female-led FinTechs in the second half of 2021.
Two deals, Starling Bank’s $454 million Series D and Generation Home’s $452 million Series A, together accounted for $906 million of that $1.6 billion total. Both deals occurred in the first half of 2021.
Commenting on the data, Janine Hirt, CEO of Innovate Finance, said:
“While our latest set of investment data shows a remarkable performance by the UK FinTech sector in the first half of 2022, the gender gap is widening, with a significant YoY drop in investment for female founders. Our ecosystem must work together to even the playing field and provide equal opportunities for females and for all underrepresented FinTech leaders.
If we are to continue as a global industry leader, we need to facilitate growth in female-founded businesses and promote broader diversity and inclusion in FinTech”.
Macroeconomic Considerations
And Investor Advice
The results of the first half of 2022 reflect both the macroeconomic landscape and investment behaviours. Despite the general correction, investors have asserted that the current environment presents strategic opportunities for founders as well.
Oliver Richards, Partner at MMC Ventures, comments:
This is different to any downturn. There is a strong case to be made that good businesses will continue to be funded”, provided that startups launch truly innovative products and operate with sustainable financial runways. According to Richards, the slowdown in investment activity, combined with the reports of lower valuations, adds up to “a sense check from the massive valuations” of recent years. “It’s a cue [for the FinTech ecosystem] to get back to basics and focus on what's important: world class entrepreneurs and innovative business models”
- Oliver Richards, Partner, MMC Ventures
This correction will be good for early stage startups [in the long run] for several reasons. One, as values go down companies become more attractive to investors. Two, companies will have a better chance of success. For founders, lower valuations can allow them to live up to investors' expectations”
- Kevin Chong, Co-Head, Outward VC
Right now investors are attracted to founders who will be “responsible stewards of capital”, who are focused on sensible and sustainable growth and strong unit economics.”
- Jay Wilson, Investment Director, AlbionVC
Conclusion: It Is Not Time To Rest
On Our Laurels
A mere six months after closing 2021 on a high note, this year is showing marked fluctuations in FinTech investment around the world. Major markets like the US, Netherlands, China and South Korea have seen material slowdowns while top hubs like the UK continue to see growth. These half year results might reflect both geopolitical shifts and the wider market corrections seen across many asset classes.
As we head into a period of economic volatility, platforms may choose to raise smaller amounts of capital if valuations are lower, forcing them to increase cash flow from their existing business. Perhaps 2022 will bring more innovation, not only in products, but also in the new ways FinTechs operate.
Notes
The data was compiled and summarised by Innovate Finance on 1st July 2022 using PitchBook data.
FinTech investment includes accelerator, incubator, angel, seed, early and later stages VC, and PE growth/expansion funding.
The data has not been reviewed or approved by PitchBook.
Pitchbook updates its data in real time, as deals get announced or closed, or deal size adjusts during the course of the transaction.
The figures on investments in female-founded businesses are based on PitchBook data categorised by founders’ gender.
