Investment in the UK’s top-performing fintech sector slowed by more than a third in the first half of 2020, as investors held onto their cash during the pandemic.
However funding levels still gained 22 per cent on the second half of 2019, as UK venture capital investment in fintech reached $1.84bn across 167 deals in the first six months of this year.
This was compared to $3bn invested into 263 startups in the first half of 2019, representing a 39 per cent drop year-on-year according to data from Pitchbook.
Over half of that $1.84bn went to just five companies, as the continued rise in mega deals — rounds of over $100m — signalled the ongoing maturing of the sector.
UK digital banking giants Revolut and Starling Bank took the top two spots in fintech funding, raising $580m and £100m respectively in 2020.
They were followed by Checkout.com and Onfido with mega rounds of $150m and $100m, while Thought Machine came in fifth at $83m.
“The proliferation of digitisation started well before Covid-19 but it has since accelerated even further,” explained Onfido chief executive and co-founder Husayn Kassai.
“Most infrastructure companies that support the digital transition, such as online communications, payments, identity and so on, have seen three years of transition happening within three months.”
Just a fifth of funding in the first half of 2020 went to UK companies receiving between $5m and $20m, with 35 fintech startups raising over $376m collectively.
Smaller injections of up to $5m went to 87 companies — marking only eight per cent of the half-year total.
“It’s encouraging to see investors are still backing fintechs, particularly those which are accelerating the digitalisation of society,” said Innovate Finance chief executive Charlotte Crosswell.
“But we need to highlight the significant drop in the amount of capital raised during the first half of the year. This is particularly impacting startups, with a recent survey showing that 75 per cent of smaller fintech firms are concerned about their next funding round.”