Tracxn launches its Fintech UK report. Total funding for Fintech Startups will fall by 13% in 2022

Tracxn, a leading global SaaS-based market intelligence platform, has released its Fintech UK report. The report, based on Tracxn’s extensive database, provides insight into the UK’s Fintech space.

The UK has been one of the top Fintech centers and has even been called the global Fintech capital. When it comes to startup funding, Fintech is the leading segment in the country.

Total UK Fintech startup funding fell 13% to $11.2 billion in 2022 from $12.9 billion in 2021. This was largely due to a sharp 26% decline in late-stage funding to $7.2 billion dollars in 2022 from $9.8 billion in 2021. Stage investments surged 34% to $3.4 billion this year, compared to $2.6 billion last year.

The average ticket size for seed-stage investments increased by 26%, while the average ticket size for early-stage funding increased by 76% in 2022, compared to 2021. The number of $100 million+ funding rounds fell by 34% to 23 rounds in 2022 from 35 rounds in 2021.

Q1 of 2022 witnessed the highest ever funding in the UK Fintech sector, after which investment began to slow. Total funding fell by 66.7% from $8.4 billion in the first half of the year to $2.8 billion in the second half of 2022. This decline in investment was mainly due to the ongoing war, which has increased the cost of energy and other dependent products and caused a decline in economic activity across the region. However, the UK’s Fintech sector is doing relatively better in terms of funding, compared to countries such as the US, China and India.

Y Combinator, SFC Capital and Development Bank of Wales are the top seed stage investors, while the top early stage investors are Octopus Ventures, Force Over Mass and LocalGlobe. The leading late-stage investors are Dawn Capital, BlackRock and Toscafund Asset Management.

Wealth management technology company FNZ, which raised $1.4 billion from Motive Partners and the Canada Pension Plan Investment Board in a private equity round, recorded the highest funding round of 2022.

There were fewer new entrants to the Unicorn club this year, with only 6 companies joining the list, compared to 14 in 2021. InsurTech company Ondo was the only IPO from the Fintech space in 2022, down from 8 IPOs in 2021.

Payments, investment technology, cryptocurrencies and banking technology were the top business models in terms of funding in 2022. Despite being the top sectors, banking technology and payments sectors have seen a drop in funding of 55.7% and 31.4% respectively, compared by 2021. This was due to rising inflation, which limits consumers from spending on services that are not absolutely necessary.

In 2022, the Investment Tech and Cryptocurrencies sectors saw a massive increase of 206.6% and 107% respectively from 2021. In Europe, the UK is currently the largest market for cryptocurrencies in terms of transaction value. This has made the UK an attractive investment opportunity for investors looking to venture into this area.

The UK government has taken steps to make the UK a global hub for crypto-asset technology. This gives the authorities the power to regulate activities related to crypto assets. This includes restrictions on foreign companies selling to the UK, restrictions on advertising on crypto products and provisions on how to deal with collapsed companies. This regulation will encourage investment in the sector and build confidence among consumers.

In terms of total funding to date, London has attracted the maximum investment ($43 billion), followed by Edinburgh ($1.5 billion) and Blyth ($731 million).