UK fintech funding surges amid government drive to create global hub

• Funding soared sevenfold in 2021 for UK-based fintechs.
• We predict Britain’s fintech scene will continue to attract considerable investment.
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By the numbers: UK-based fintechs scored a sevenfold funding jump last year.

• London attracted more fintech funding than the rest of Europe, the Middle East, and Africa (EMEA) put together.
• The investment total was driven by 601 deals completed last year, up 27% from 2020.
• London’s fintech boom was boosted by massive deals like the London Stock Exchange’s buyout of Refinitiv for $27 billion and Wipro’s $1.5 billion Capco takeover.
• Five of the 10 largest fintech deals in the EMEA region were completed in the UK.

Why is funding up? The UK has created an environment that attracts fintech funding and encourages startups:

• Government support: The UK government sponsored the Kalifa Review of UK Fintech, which recommended strategies to stimulate fintech development, including a dedicated $1.28 billion Fintech Growth Fund. The government also funds Tech Nation, a network for accelerating fintech growth.
• Favorable regulatory environment: The Financial Conduct Authority (FCA) has taken an active role in developing the industry. It established a sandbox where approved fintech firms can test products with real consumers and updated its rules to let companies with dual-class shares join the premium segment of the London Stock Exchange (LSE). The new rules broaden fintechs’ investor bases and could benefit firms like Wise that are listed on the LSE’s standard segment.
• Tech-savvy customers: The UK’s consumer base has one of the highest fintech adoption rates in the world, at 71%, per The Global City—giving fintech firms a huge market in which to win customers.
• Thriving tech scene: Zooming out from financial services, UK tech firms captured more than one-third of investments into Europe in 2021, bringing in roughly £30 billion. Raises from tech firms going public also grew, doubling from 2020 to hit £6.6 billion ($9.08 billion). A culture of tech entrepreneurship and a wide talent pool have turned the technology sector into a bright spot in the UK economy

What next for UK fintech funding? We predict that global fintech funding will reach a new record this year, surpassing $150 billion. Despite rising interest rates and funding growth in rival markets like Latin America and the EU, Britain’s fintech scene will continue to attract considerable investment.

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