The UK Fintech startup ecosystem ranked second across the world in terms of funding in H1 2023, similar to last year. In the first half of 2023, the UK’s Fintech startup ecosystem raised total funding of $2 billion. However, funding has been declining across countries and industries in 2023, and the UK is also experiencing the same.

 Total funding into the UK FinTech sector dropped by 78% to $2 billion in H1 2023 from $9.1 billion in H1 2022. Funding raised in this space also fell 29% in the first half of 2023, when compared with H2 2022. This decline is largely due to a fall in early-stage investments in H1 2023, which fell 43% and 71% when compared with H2 2022 and H1 2022, respectively.

Late-stage funding in H1 2023 in this space saw a decline of 17% and 76% as against H2 2022 and H1 2022, respectively. However, seed-stage investments in H1 2023 saw a slight increase of 5.5% from the second half of 2022.

Q2 2023 contributed to almost 66% of the funds raised by the overall sector in H1 2023. FinTech companies in the country attracted investments worth $673 million in Q1 2023 and $1.13 billion in Q2 2023. The first quarter of this year has become the least funded quarter since 2020.

In the past year-and-a-half, this space has seen hardly any activity in terms of IPOs. Only one UK-based FinTech startup went public in H1 2022, following which there were no IPOs in H2 2022 and H1 2023. 43 acquisitions were recorded in the first six months of 2023, as against 40 in H2 2022 and 44 in H1 2022.

There was only one new entrant to the Unicorn club in the first half of 2023, as against five in the same period last year and one in H2 2022. Further, three out of the seven 100M+ fundings in the UK Tech space in the first half of 2023 are from the FinTech sector.

Cryptocurrencies, RegTech and Banking Tech are the top-performing segments in the FinTech sector, based on funding in H1 2023. The Cryptocurrencies segment is the highest-funded segment, accounting for almost 34% of the total funding received in the UK FinTech space in H1 2023. While funding into cryptocurrency startups across the globe is witnessing a declining trend, the UK region is showing promise as the highest funded segment in the sector.

Among cities, London contributed more than 75% of the funds raised in the country within the overall sector. FinTech companies based in London attracted investments worth $1.5 billion in H1 2023, followed by Colchester ($150 million) and Eastbourne ($98.1 million).

Augmentum, Lloyds Banking Group and Triple Point were the top investors in the UK Fintech space in H1 2023. Triple Point, Forward Partners and Founders Factory were the lead investors in seed-stage investments. CommerzVentures, Augmentum, and Northzone were the most active investors in the early stage. HSBC Corporate Ventures, SoftBank Vision Fund and Rocket Internet were the most active investors in the late stage.