The fintech industry in the UK has experienced remarkable growth in recent years, but there are concerning signs of declining investment levels. What has caused this and what does it mean for the future?
Research by Beauhurst and Deloitte reveals a significant drop in equity investment for UK fintech companies in the last quarter. From £2.13bn in Q2, it plummeted to just £491m in Q3. The number of individual investment deals also decreased, mainly due to the challenging economic situation. Some new entrants had to halt their activities, exacerbating the issue.
This raises concerns about the industry’s prospects in the coming quarters until the economic situation improves and more funding becomes available. The problem is not unique to the UK, as valuations of new businesses have fallen globally. For instance, Swedish startup Klarna had to slash its valuation in half to secure new capital in June. Less established companies faced even greater difficulties, with some having to postpone funding plans.
Despite this, it is important to note that exceptional fintech ideas will continue to attract the necessary investment. Successful startups, like eToro, have proven their appeal to investors across various economic situations. With a strong user base and innovative features, eToro has secured over $320 million in funding. Other notable London-based fintech companies, such as Soldo and Transferwise, have also demonstrated their potential through significant funding rounds.
While current economic challenges pose obstacles to fundraising, fintechs with outstanding ideas and robust business models will find a way to move forward.