Britain’s fintech sector has attracted “record-breaking” investment so far this year, according to new research.
Analysis carried out by UK fintech body, Innovate Finance, revealed that a total of £4.1bn has flowed into the country’s fintech sector in the first half of 2021, marking a 34% increase on the total amount in 2020.
The cash boost has also far exceeded the record-breaking year set in 2019, which saw £3.3bn invested in the UK fintech sector.
Innovate Finance said the study highlights the current strength of the fintech sector, despite the impact of the pandemic, and cements Britain as a potentially major fintech hub in Europe.
So far this year, the sector saw 13 companies close deals above $100m, beating the record set in 2019 when 10 firms secured comparable investment.
Currently, the UK ranks second only to the US in terms of funds raised, and well ahead of the levels secured by Brazil (40 deals and $3bn), Germany (56 deals and $2.5bn) and India (132 deals and $2.2bn) during the same period.
Commenting on the research, Janine Hirt, CEO of Innovate Finance, said: “This analysis clearly demonstrates that the appetite among international investors to fund high-growth, innovative firms has never been greater, and is a testament to the UK’s position as a world leader in fintech.
“Fintech is one of the fastest-growing sectors of our economy and has a vital role to play in the UK’s economic and business recovery. To have secured record funding – in just six months – speaks to an enduring confidence in UK innovation, as well as our ability to build and scale world-class businesses.”
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Strong investment in the first half of 2021 comes off the back of the Kalifa Review, which set out recommendations for the future growth of the sector and provided a roadmap to ensure long-term, sustained investment.
Hirt continued: “It is hugely encouraging to see evidence of this resilience and growth, particularly in light of the uncertainty and challenges brought on by 2020. Both the flow of capital and a wide talent pool are essential to maintaining the sector’s strength, and we remain committed to supporting efforts in these vital areas.”
What is happening in Scotland?
Scotland is also set to have a major impact on Britain’s fintech sector going forward, and several small Scottish fintech startups, including Zumo and Modulr, are leading the charge.
FinTech Scotland announced the development of a ten-year ‘innovation roadmap’ in May which aims to support the growth of the country’s digital economy and “burgeoning” fintech sector.
The industry body also contributed to the Fintech Strategic Review (FSR) commissioned by HM Treasury in February, providing a five-point plan to leverage innovation through a positive regulatory environment, developing diverse skills, facilitating investment to scale enterprises and accelerating a targeted approach to inward investment.
Commenting on the boost to the fintech sector in Scotland, Stephen Ingledew, Executive Chair at FinTech Scotland, said: “The number of fintechs in the community has gone up, the amount of investment monies going into fintech in Scotland has gone up, and growth has accelerated as well.
“On all counts, both in the number of firms, their growth and investment, the breadth of it has certainly accelerated in the last 12 months.”
Data collected by FinTech Scotland revealed that the number of fintech SMEs continues to grow across the country, seeing a 15% increase since the start of 2021. The FinTech Scotland community now stands at 170 SMEs, including 10 new start-ups, four international businesses and nine established Scottish tech businesses.
Going forward, Ingledew says he sees a continuation of the kind of growth that the country is already seeing: “There is no let-up in both the new enterprises being created, particularly out of universities such as Edinburgh and Strathclyde. We are seeing a growing demand from the financial enterprises to work with fintechs, as well as a growing number who are expanding overseas.
“Not only are they [fintechs] getting the opportunity in Scotland, they are getting the opportunity internationally, whether it’s in India, Australia, and across the rest of the UK as well. So there is real momentum at the moment.”