The UK’s fintech sector saw record-low investment over the last 10 years while UK AI startups are taking investor’s capital and attention away from the sector.
Investment into UK-based fintech firms in the first half of 2026 is the lowest in the last decade and continues to decline as investors flock to the AI goldmine.
According to KPMG’s Pulse of Fintech report, UK fintech investment in H1’ 2026 stood at £1.8bn, a significant decline from the £5bn invested in the same period last year.
The UK still remains the European capital for the most fintech investment, however, the UK accounted for 22% of all Europe, Middle East and Africa (EMEA) investment, which is down from the 68% the UK accounted for in H2’ 2025.
The £1.8bn invested is the lowest since 2016 when £735m was invested in the UK. The H1’ 2026 investments are also on par with 2020 when Covid impacted deals not just in the UK, but across the world.
Mergers and acquisitions (M&A) activity also fell to the lowest in a decade, with 205 deals completed in H1’ 2026, a decrease from 281 the year before. Despite the slump, the UK remains the second-leading country for M&A fintech deals behind the US and exceeds all other European countries combined.
Some of the largest UK fintech deals that were completed in H1’ 2026 were Ebury’s £550m funding round led by Centerbridge Partners, Paymentology’s £130m investment round co-led by Apis Partners and Aspirity Partners, and 9fin’s £124m funding round.
AI investment in the UK accounted for 25% of total fintech investment, reaching £445m across 79 deals in H1’ 2026 relating to fintech firms.
This follows a similar trend across multiple geographies as AI infrastructure and value-added services coming from leaders such as OpenAI and Anthropic, with private equity and capital management firms placing heavy emphasis on investing in AI technologies.
The first six months of 2025 saw £382m invested into UK AI across 67 deals, comprising 16% of all fintech investment. The UK continues to lead Europe for AI-related fintech investment, ahead of France at £244m and Germany at £134m.
Investment in UK-based cybersecurity firms saw a £90m increase from H1’ 2025. While only representing 5% of all fintech related deals, the seven cybersecurity deals in H1’ 2026 represent a significant increase from the three last year.
Hannah Dobson, Head of Fintech and Partner at KPMG UK, said: “It has been a challenging start to 2026, with levels of investment on a par with those seen during the first wave of the pandemic. That said, there are pockets of significant demand, particularly in AI, where investment is gaining prominence even as the wider market has softened.
“Investors are continuing to back areas where they see long-term structural growth, even as capital deployment becomes more selective. Cybersecurity investment also increased year-on-year, with a clear overlap with AI as the whole sector navigates the age of frontier AI models and the opportunities and threats these create for businesses.
“While there are bright spots, the geopolitical and economic headwinds facing firms only stand to intensify as the year continues and the second half of the year is likely to remain challenging for fundraising.”
Looking globally: AI dominates investor interest
Outside the UK, global fintech investment in H1’ 2026 has grown from £37.1bn in H1’ 2025, to £53.1bn with the Americas attracting the most interest.
The Americas attracted over 80% of global fintech investment in H1’26 – £63.8bn across 1,120 deals – of which the US accounted for £59.4bn across 933 deals.
According to a report from HSBC in July 2026, global AI funding hit an estimated $510bn in H1’ 2026, which surpasses the total amount in AI investment throughout the entire of 2025.
Where fintech investment has dwindled in the UK, AI is thriving in the country after HSBC found AI startups in the UK secured $12.6bn in H1’ 2026. This accounted for up to three-quarters of all venture capital invested during the same six-month period last year.
Karim Haji, UK and Global Head of Financial Services at KPMG, added: “AI is driving new opportunities, corporates are becoming more active, and private equity is looking at consolidation plays.
“Even smaller startups are attracting attention when they bring something truly differentiated to the table. Together, these trends point to a positive long-term outlook for the fintech sector.”
Back to global fintech investment, global deal volume fell from 2,501 deals in H2’ 2025 to 2,100 in H1’ 2026. KPMG attributed this to “investor selectivity despite higher capital deployment”.
Fintech investment in the Asia-Pacific region declined from £5.2bn across 426 deals during H2’2025, to £3.4bn across 350 deals in H1’2026.
Venture capital investment remained strong across the global fintech sector, led by the US which saw £12.3bn in VC investment. At the sector level, payments led the way, attracting £32.5bn in H1 ‘2026: well over 2025’s annual total, as a result of several large megadeals.
