UK fintech investment dropped by a calamitous 57 per cent to £4.6 billion in the first half of 2023 compared with £10.8 billion in the same period in 2022, according to the latest KPMG Pulse of Fintech report.
The volume of UK fintech deals also dropped from 392 in the first half of 2022 to 212 UK M&A, private equity or VC deals completed in the first half of this year.
The reasons are not hard to fathom: investor jitters over high inflation, rising interest rates and the grinding Russian invasion of Ukraine, combined with tech stocks cooling post-pandemic, have all led to investors sitting on their hands.
What does this mean for UK fintech start-ups going forward?
Despite the retraction, the UK remains the centre of European fintech investment with British fintechs attracting more funding than fintech start-ups in the rest of Europe and the Middle East combined, second only to the US, and ahead of India, Germany, France, Sweden and Italy.
The UK is home to many of the world’s largest fintech companies, with a thriving ecosystem of around 2,500 fintech companies in Britain, mostly in London, making London the third biggest fintech hub in the world, in line with predictions that the number of fintech firms will double by 2030.
Additionally, the UK has one of the highest fintech adoption rates in the world at 71 per cent compared with a global average of 64 per cent. For example, Revolut has reached 35 million customers worldwide, and Starling Bank is approaching 4m users.
Unicorns abound, too. A fact sheet from the City of London reports that the city is home to 100 tech unicorns, with fintech businesses making up the largest slice of the pie. These include Atom and Oaknorth Banks, Rapyd, Checkout.com, SumUp and GoCardless.
With the sector in robust health, new opportunities are presenting themselves. Deloitte has identified that the UK fintech ecosystem is made up of eight broad categories, including banking, RegTech, InsurTech, lending, payments and WealthTech.
So, where are the opportunities for UK fintech start-ups?
Blockchain and crypto look set to be the most active sub-sector this year, with a 20 per cent share of total fintech seed deals. The rise of machine learning and AI is impacting too, as companies utilise these technologies for everything from customer service to assessing risk.
The newly released draft Payment Services Directive 3 will likely help boost interest and investment in fintechs leveraging open banking and embedded finance in the coming quarters.
With so much scope, it isn’t surprising that a whole new slew of start-up companies are drawing attention. You can discover five interesting UK-based fintech start-ups below.
#1 – Carbonplace
Founded in 2020 by a network of global banks which include NatWest Group, Carbonplace facilitates the secure, transparent, and streamlined transfer of certified carbon credits across a global network of buyers and sellers through their banks.
The global voluntary carbon market is projected to grow by nearly 60-fold, reaching $500 billion annually by 2050.
By opening the voluntary carbon market and enabling secure and efficient transactions, Carbonplace – a fintech which has been likened to the SWIFT of the carbon markets – will allow the market to scale and deliver urgently needed large-scale investment in climate action, from reforestation initiatives to innovation in carbon capture technologies.
#2 – SuperFi
Aiming to help people get out of debt faster, SuperFi is a timely start-up given the current economic climate. It works by consolidating all of a users’ debt in-app, which allows it to then offer the fastest way to repay. It will also configure notifications and due dates, and you can pay off your credit cards directly in-app too.
Co-founded by Tom Barltrop and Nick Spiller, the pair were motivated by the far-reaching problems debt causes, including mental health issues, high social costs, and significant economic impact.
In July, SuperFi announced it had raised a £1 million pre-seed funding round led by UK seed fund Ascension and its impact fund, Fair By Design, alongside Force Over Mass and a number of other investors.
#3 – Kani
Fintech reporting and reconciliation made simple is the raison d’être of Kani, a B2B SaaS platform founded in 2018. Newcastle-based, the company is all about making finance processes easier, offering automation, accuracy and compliance to reconciliation and reporting for finance teams.
Used by youth banking platform Osper, and Railsr (formerly Rails Bank), among others, Kani incorporates business intelligence and can dig deep into the numbers to help users make informed decisions about business activities.
#4 – Fidel API
Ranked among the 15 fastest-growing UK technology companies on the 2021 Deloitte Technology Fast 50 list, Fidel API’s mission is to help developers avoid complex integrations with payment service providers, which in turn helps to bring products to market faster and more efficiently. Via a single point of integration through its API, this allows developers to build on top of card transactions and the solution can be used across rewards, attributions, insights, digital receipts, or expense management too.
#5 – Treecard
Treecard began life as a Mastercard debit card made from sustainably sourced wood and recycled plastic bottles. The idea was that Treecard planted trees as you spend. To date, Treecard has funded the planting of five million trees with the aim of hitting one billion new plantings.
However, Treecard closed down its debit card in September in favour of concentrating on its app, which you can connect to your other cards.
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Kirstie McDermott works for our job board partner, Jobbio. Based in Dublin, she has been a writer and editor across print and digital platforms for over 15 years
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