UK capital of European fintech, despite four-year investment low

UK fintech investment hit a four-year low in 2024, but the UK remains the capital of European fintech, a new report has found.

The KPMG Pulse of Fintech report found that UK fintech investment dropped to $9.9bn in 2024, which was down 27 per cent from $13.6bn in 2023. UK fintech investment in 2024 was at its lowest level since 2020 ($7.6bn), the report said.

Geopolitical uncertainty, high levels of inflation and the higher interest rate environment all contributed to more subdued levels of UK fintech investment, compared to the record highs in 2021. 

Despite the fall, the UK still attracted more funding than France, Germany, China, India, Brazil and Canada combined, the report, which is published bi-annually, found. It also attracted almost half the entire funding of the EMEA region.

The largest deal in the UK was the $267m venture funding round by money transfer provider Zepz.

Meanwhile, fintech investment across EMEA (Europe, Middle East and Africa) dropped to an eight-year low in 2024, but there are signs of a “slow recovery”, the report said.

Fintech investment across EMEA fell 26 per cent year-on-year in 2024 to $20.3bn, amid economic and political uncertainly, the report said.

The biggest fintech deal in Europe in 2024 was the $560.6m sale of online bank, Knab, to Austrian financial firm Bawag Group.

Hannah Dobson, partner and UK head of fintech at KPMG UK, said:

“2024 was another tough year for fintech investment, which inevitably has led to some business failure and some consolidation. 

“It has also sharpened the focus on a path to profit and cost control which positively leads to more sustainable saleable businesses in the longer term.

“In EMEA, and particularly the UK, there are signs of a slow recovery in deals as the reduction in interest rates and more political stability leads to better certainty. The impact of regulation is an ongoing challenge for fintechs across EMEA as they face into new EU and UK regimes in areas such as AI and BNPL. 

“Despite the drop in investment, the UK remained the capital of European fintech in 2024, attracting almost half the entire funding of the EMEA region. We expect UK investment to remain relatively soft in the first half of this year, although it will likely begin to pick up as interest rates reduce further, with common consensus that this will be in Q3/Q4.”

Karim Haji, global and UK head of financial services, KPMG, added: 

“While global fintech funding dipped in 2024, it’s encouraging to see bright spots in some areas of investment. Payments continued to be the rockstar of the fintech subsectors, driven by late-stage deals and an increasing focus on consolidation, and regtech gained a lot of traction.

“We are starting to see more deals coming through because of interest rate cuts in different jurisdictions and the lower cost of funding. However, we will have to wait and see if the changing world trading conditions impact inflation, interest rates and consequently these positive signs of market change.”