Fintech Investment Landscape by Innovative Finance

Fund Fellow Founders Fintech Investment Landscape by Innovative Finance

Below you can check the key take-aways from the report made by the Innovate Finance who is the independent industry body that represents and advances the global FinTech community in the UK. Its mission is to accelerate the UK’s leading role in the financial services sector by directly supporting the next generation of technology-led innovators

Summary:

Global FinTech investment drops by 30% in 2022, but the UK still maintains its leadership position attracting $12.5 billion in investments. Find out how the UK's resilience has kept it ahead of other European countries and how the industry is expected to evolve in 2023. Plus, discover the gender investment gap and the challenges facing B2C FinTech. Read on for all the details from Innovate Finance's latest report.

After a record-breaking year in 2021, FinTech investment slowed down in 2022, with $92 billion invested into the sector, compared to $130 billion in 2021. Seed investment rounds performed better than expected, raising $7.5 billion.

– Janine Hirt, CEO, Innovate Finance

In a challenging global market, the UK received $12.5 billion of FinTech VC investment, with $8.9 billion invested in the first six months of 2022.
In challenging economic times, UK FinTechs are holding the fort in securing great levels of investment. The UK is still receiving more investment in FinTech than all of the next 10 European countries combined.

– Chris Woolard, UK Head of FinTech, EY

The UK FinTech market performed strongly during 2022, despite a difficult shrank by 30% from the previous year. The UK showed resilience and fortitude, dropping only 8% year on year.
Innovate Finance reported that global FinTech investment was up 8% in the first half of 2022, but that US fintech investment shrank by 10% and UK FinTech investment grew by 24% from the previous year.
Innovate Finance assessed VC funding across 10 technology verticals and found that activity dropped by 56% from 2021 to 2022.

Investment Series

Series A, B, C, D, and E raised $12.4 billion, $16.3 billion, $13.1 billion, $9.1 billion, and $2.8 billion, respectively.
The macro environment in 2023 is rather negative, with potential further interest hikes in western economies and lack of growth prospects in most European countries.
This downturn may be shallower than the 2008 financial crisis, but start-ups must hope for the best and prepare for the worst.
The UK is likely to avoid a technical recession in 2023, thanks to fiscal measures and an improving geopolitical sentiment. However, the venture market is likely to see continued contraction.

Cross Industry Data Confirms FinTech Sector Maturity

The chart below shows annual UK FinTech investment since 2019 compared to Global VC investment (all sectors) and London Stock Exchange IPOs. It indicates that UK FinTech investment is not more volatile than other funding markets.

The UK in Numbers

The United Kingdom has shown its resilience as a top destination for FinTech, attracting $12.5 billion in investment across 545 deals in 2022. The UK also boasts 32 Megadeals, with 13 deals exceeding $200 million.
In 2022, investment activity in the UK increased by 18% to $532m for seed funding, 73% to $3.1bn for growth capital, and 16% to $7.1bn for later stage deals.

Gender Investment Gap Grows

In 2022, there was a large drop in investment into female-founded FinTechs, with just $8.8 million invested in 4 deals. The heftiest investment went to Starling Bank, which netted $170 million.
Female founders are needed in FinTech and other regulated industries, but the nature of those companies rely on female representation.
In 2022, there were 614 mergers and acquisitions in global FinTech, generating over $72 billion, with an average deal size of $117 million.
In 2023, we expect to see an increase in M&A and consolidation, particularly amongst Twig and Vybe.
Activity due to large strategics taking advantage of robust balance sheets, attractive valuations, and public market volatility. Meanwhile, PE will be the new IPO.
FinTech investment is down 30% in 2022, but it will recover in unison with other capital markets. B2C Fintech will face additional challenges in 2023 as inflation impacts everyday consumers.
Investors will be challenged to fund the growth of less anticipated companies, and will most likely come to some high profile acquisitions and folding of companies the public did not anticipate.
The year 2023 represents a unique opportunity for tech entrepreneurs to start new years.
In 2023, FinTech will be challenged with less capital available to fund the growth of less anticipate, but B2B FinTech will have many opportunities.

About Innovate Finance

Innovate Finance is the single point of access for the most forward-thinking participants in financial services to promote enabling policy and regulation, talent and skills, business opportunity and growth, and investment capital.

Notes

Innovate Finance compiled and summarised PitchBook data on fintech investment as at 31st of December 2022 and includes both equity and debt capital raises.

Full Report: HERE (Innovate Finance)

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