British FinTech firms received a record $11.6 billion in investments in 2021 as investors looked to capitalise on new regulation in the sector.
Total investment in UK financial technology firms rose more than 217 per cent last year, with the majority of global capital invested in later-stage growth funding, data from Innovate Finance, the UK FinTech industry body, showed.
Only FinTechs in the US recorded more investment, with an injection of $46bn.
Janine Hirt, chief executive of Innovate Finance, said the “impressive investment figures speak for themselves”.
FinTech delivers “on all the biggest global trends and needs, including business productivity, consumer behaviours, financial wellness and inclusion, climate change solutions and cyber security — which is why it is such a magnet for investors”, she added.
The UK’s FinTech sector also outpaced the rest of Europe and dominated the continent in terms of capital invested, with almost half of the $24.3bn invested across Europe going to British firms.
The surge in funding gives the sector a post-Brexit boost as regulators and ministers enact a range of new measures set out by Lord Hill’s Review of UK listings and the Kalifa Review of FinTech last year, designed to retain the UK’s position as a leading FinTech hub following Britain’s exit from the EU.
The $11.6bn in funds invested in the UK was spread across 713 deals, which marks 11 per cent of all global deals in 2021, a slight increase from the 10 per cent seen in the previous two years.
“Our FinTech sector is reaching new levels of maturity, and investors are responding to the growing market demand for the products and services our entrepreneurs are able to provide,” said Ms Hirt.
Lord Gerry Grimstone, Minister for Investment, said 2021 was a first-class year for UK investment, thanks in part to the Global Investment Summit in October, which secured nearly £10bn in investments in the UK’s industries of the future.
“We proved that the UK FinTech sector is more than a force to be reckoned with, maintaining our position as the number one FinTech investment destination in Europe, and number two in the world, second only to the US,” Lord Grimstone added.
While the US and UK took first and second position respectively, India came in third place with $6.3bn invested in its FinTech sector, followed by Germany at $4.4bn and Brazil at $3.8bn.
Looking more closely at the UK figures, investment outside the UK capital and the south-east of the country is on the rise, with $696m invested compared to $206m in 2020 — a 237 per cent increase, as other areas of the UK, such as Northern Ireland, establish strong regional hubs.
The top deals in Britain were dominated by challenger banks such as Revolut, Monzo and Starling, with Revolut’s $880m round in July among the top 10 most valuable rounds globally.
However, challenges remain for the sector, with the country lacking growth capital as the majority of funds backing UK companies went into early or late-stage funds, while the female funding gap persists, with women founders receiving only 9 per cent of all capital invested.
