Investment into UK fintech firms has taken a hit during the first of 2022, declining 65% from the same period last year.
KPMG revealed that UK fintech investment in 2022 was $9.6bn in total, a steep drop from the $27.8bn total investment firms garnered in 2021 where fintechs flourished amid a sharp change in customer behaviour following the pandemic.
However, since the turn of the year, KPMG outlined a multitude of factors that have played a key role in the downturn of investments.
The accounting organisation listed turbulent public markets, ongoing supply chain disruption, high and increasing levels of inflation and interest rates, as well as ongoing macroeconomic conditions, highlighted by Klarna CEO Sebastian Siemiatkowski, when describing the BNPL providers recent decline in valuation.
He stated to TechCrunch back in May: “When we set our business plans for 2022 in the Autumn of last year, it was a very different world than the one we are in today.
“Since then, we have seen a tragic and unnecessary war in Ukraine unfold, a shift in consumer sentiment, a steep increase in inflation, a highly volatile stock market and a likely recession.”
Regions such as the Americas and the EMEA have also seen regressions of investment in their fintech sector in both total number of global investments and deals falling from the previous year.
The same can not be said for the Asia-Pacific region however, as the market attracted new record highs as a result of several large M&A transactions, most notably Block’s $27.9bn acquisition of Australian BNPL service Afterpay.
After labelling the first half of 2022 as “unexpected” for the fintech market, KPMG analysed key trends that the sector has faced over the past six months, some of which are: shuttering of IPO windows in the wake of rapid declines, increased focus on automation in cybersecurity, and continued strength of the payments sector in various jurisdictions.
The payments space accounted for the largest share of total fintech investment during the first half of 2022, raising $43.bn followed by $14.2bn raised by the crypto sector.
KPMG predicts challenges to the market will continue to endure, as investors focus on profitability and cash flow. The account firm highlights the M&A sector as a well-positioned market to grow as investors may look for attractive deals in the midst of declining valuations.
Anton Ruddenklau, Global Fintech Leader at KPMG International, added: “The fintech market experienced a massive year globally in 2021, which makes it look like investment has somewhat fallen off a cliff so far in 2022. That really isn’t the case. We’ve simply shifted back to levels seen in 2019 and 2020.”
