UK’s Fintech Startups See Weakest Quarter in Six Years, Funding Declines Significantly – Report

Tracxn, a global SaaS-based market intelligence platform, has released its Geo Quarterly Report: FinTech UK – Q3 2023.

The report, based on Tracxn’s extensive database, provides insights into the UK FinTech space.

The UK Fintech startup ecosystem “ranks third in terms of overall funding, after the US and China.”

More than 12,000 companies in the UK “operate in the Fintech space,” accounting for almost 10% of the total Fintech companies in the globe.

Fintech has been one of “the top-performing sectors in the country, based on funding activity as well as the number of companies found in this region.”

The UK reportedly has “the second-highest number of unicorns in this space, next to the US.”

Further, London has “the third-highest number of FinTech Unicorns in the world.”

The UK has been one of “the major regions for FinTech companies, with its leading talent pool, higher Fintech adoption rate, higher concentration of financial and professional services firms and forward-thinking regulations.”

Despite these advantages, the space has witnessed “a downward trend in funding in 2023, due to the current macroeconomic environment, rising interest rates, inflation and the increase in gas prices in this region.”

The UK Fintech startup ecosystem hss “witnessed its highest funding in Q1 2022, after which the funding started to decline. 2023 has been the least funded year since 2019, based on the funds raised in the first three quarters of the year. Q3 2023 has become the least funded quarter in the last six years since 2017.”

The UK has ranked fifth “in terms of funding raised in Q3 2023 and ranks second in terms of overall funding raised in 2023 YTD.”

In Q3 2023, the UK Fintech space has “witnessed total funding of $279.1 million, which is a 79% drop compared with $1.3 billion raised in Q2 2023 and a 77% decline from $1.2 billion in Q3 2022.” This drop in funding is largely “due to the decline in late-stage and early-stage investments.”

Late-stage funding worth $147 million “was observed in the third quarter of 2023, an 81% fall compared to $777 million raised in the previous quarter (Q2 2023) and a plummet of 83% compared to $871 million raised in Q3 2022.”

Early-stage investments in Q3 2023 “stood at $82 million, a drop of 81% from $441 million raised in Q2 2023, and also a decline of 65% compared with $235 million in Q3 2022.”

Seed-stage funding in Q3 2023 also “fell to $50.4 million, a 46% drop from $93 million raised in Q2 2023 and also a 20% drop as against $63 million in Q3 2022.”

None of the companies in this sector “raised a $100M+ round in the third quarter of the year. Further, there were no new entrants to the Unicorn club in Q3 2023, as against one new Unicorn in the corresponding quarter last year.”

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