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Kalifa Review Helps Drive Banner Year in UK Fintech VC: Report

The United Kingdom’s fintech industry is on fire. That is, at least, according to the latest report from Innovate Finance, an industry entity representing the UK’s fintech space.

brit union jack 1027898 1920Per the recently released 2021 global investment trends report, the region has enjoyed a record year with more than $11.6 billion worth of venture capital investments during the calendar year. To put that figure in context, it represents a massive 217% increase from the year prior.

“The impressive investment figures speak for themselves–it’s been a superb year for FinTech in the UK, and indeed all around the world. The huge increase in funding levels is testament to the world-class innovation and ingenuity that’s driving forward and positively transforming financial services,” said Janine Hirt, CEO of Innovate Finance. “FinTech is delivering on all the biggest global trends and needs, including business productivity, consumer behaviours, financial wellness and inclusion, climate change solutions and cyber security–which is why it is such a magnet for investors.”

The record investment numbers coincide with a comprehensive set of recommendations released at the beginning of the year known as the Kalifa Review. That review laid out a roadmap for growth taking into account regulation, collaboration and the role of government.

According to the report, the $11.6 billion invested in the UK represents 11% of all global VC fintech investments in 2021. These investments were spread out over 713 deals, also exactly 11% of all global activity.

Further, the rise in fintech activity in the UK last year correlates with an overall boost in global investments, as dealings spiked 183% year over year. The United States drove much of that growth, notes Innovate Finance, with $46 billion in capital invested in the states.

A separate study from KPMG illustrates some of the reasons the U.S. was so robust in the fintech space. Investments spanning VC, private equity and mergers and acquisitions were nearly $100 billion in H1 alone, with major deals involving Robinhood, Stripe DailyPay, Better and ServiceTitan helping to drive that figure up.

“Overall investment in fintech surged to a record high in the first half of 2021 as investors, particularly corporates and VC investors, made big bets on market leaders in numerous jurisdictions and across almost all subsectors,” said Ian Pollari, global fintech co-lead at KPMG. “Large funding rounds, high valuations and successful exits underscore the thesis that digital engagement of customers that accelerated during the pandemic is here to stay.”

One potential challenge facing the UK, however, was a noticeable funding gap between companies founded by men and those founded by women, reads the Innovate Finance report. While female founders did see an increase in funding from 2020 to 2021, they only received 9% of all invested capital, which was down from the 13% they took in during 2019.

From Twitter

Callum Burroughs @CallumBurroughs Jan 10

"New: Women have had a rough deal in the investment world despite regularly outperforming men. I spoke to two prominent female founders to discuss gendered marketing, VC investment in female fintech, and access to investing for @BusinessInsider. https://businessinsider.com/fintechs-helping-women-invest-set-to-boom-in-2022-2022-1… #tech"

“Our FinTech sector is reaching new levels of maturity, and investors are responding to the growing market demand for the products and services our entrepreneurs are able to provide. We are on the right trajectory in terms of levels of funding and now it’s time to also properly address the funding gap for underrepresented founders, if we are to create a truly sustainable and forward-looking sector,” added Hirt.

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