Economic turbulence hits UK FinTech, investment down 37%

By Gloria Methri

In a turbulent year marked by economic headwinds and geopolitical uncertainty, the UK FinTech sector has proven its resilience, securing its place as the second-largest global hub for investment. Despite a sharp 37% decline in funding, the UK attracted $3.6 billion in 2024, according to Innovate Finance’s latest report.

Global Funding Slows, UK Maintains Dominance in Europe

Globally, FinTech investment fell 20% to $43.5 billion across 6,464 deals, reflecting a tougher environment for venture capital. The United States led the pack with $22 billion in funding, followed by the UK, India ($2.2 billion), and Singapore ($1.4 billion).

The UK’s dominance in Europe remained unchallenged, with its $3.6 billion haul eclipsing the combined totals of France, Germany, and other markets. France, returning to the global top 10, raised $1.1 billion, while Germany attracted $0.9 billion. Smaller players like Switzerland ($0.5 billion) and the Netherlands ($0.4 billion) also contributed, demonstrating the continent’s innovative breadth.

A Resilient Ecosystem, but Challenges Persist

The UK’s performance was underpinned by significant deals, including $621 million for Monzo and $267 million for Zepz. However, funding for female-led FinTechs plummeted by 78%, with just $120 million raised across 71 deals, highlighting an urgent need for inclusivity in capital allocation.

Despite the downturn, the report signals early signs of recovery. Global FinTech investment in the second half of 2024 slightly outpaced the first, hinting at a potential upswing as 2025 begins. Broader venture capital markets also experienced growth, setting the stage for a renewed investment cycle.

Positioning for the Next Wave of Growth

The UK’s continued appeal as a FinTech hub stems from its robust ecosystem and proactive regulatory framework. The government has made strides with initiatives such as the Mansion House reforms, the National Payments Vision, and legislating for digital ID and Smart Data. Yet, Innovate Finance and industry leaders are calling for accelerated reforms to cement the UK’s global standing.

Tulip Siddiq, Economic Secretary to the Treasury, acknowledged the UK’s leadership but emphasised the need for vigilance: “The UK maintained its position as the FinTech capital of Europe in 2024, with around 3,000 firms supporting tens of thousands of skilled jobs across the country. But we cannot rest on our laurels.”

The upcoming Financial Services Growth and Competitiveness Strategy is expected to outline ambitious plans, including advancing Open Banking, creating a tech-enabled anti-fraud strategy, and positioning the UK as a leader in blockchain and digital assets.

Janine Hirt, CEO of Innovate Finance, urged the sector to prepare for the next growth phase: “The UK’s ability to attract $3.6 billion in FinTech investment during a year of economic turbulence reflects the strength and dynamism of our ecosystem. However, this is no time for complacency. To remain a global leader, we need to double down on innovation, market reforms and progressive regulation.”

As the global FinTech landscape evolves, the UK must act decisively to remain at the forefront. With market conditions showing early signs of stabilisation, the next investment cycle could prove pivotal in shaping the future of UK FinTech.