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By Alexander Jones, International Banker
In its “Pulse of Fintech H2 2025”, KPMG reported that investment in the United Kingdom’s fintech (financial technology) sector fell in 2025 to a five-year low of £8 billion. However, the professional-services firm also noted in its biannual analysis of global fintech funding that the UK remained the clear leader in the European fintech market and, as such, a premier global destination for the sector’s financing. This dichotomy is leading some to question whether the status of UK fintech—one of the country’s key growth engines—is diminishing, especially amid an environment of increasingly selective funding and growing pressure on valuations.
KPMG’s research revealed that UK fintech investment fell by more than a fifth last year, but nonetheless attracted more funding than the combined markets of France, Germany, Belgium, the Nordics, Ireland, China and Brazil. As for the wider EMEA region (Europe, the Middle East and Africa), total fintech investment increased to £21.5 billion from £19.5 billion in 2024.
The UK was also home to easily Europe’s largest fintech deal of 2025—the £2.2-billion fundraising round by UK neobank Revolut in November, again highlighting the appeal of the British market. In comparison, the largest deal recorded in Europe outside the UK was the much smaller £110.5-million financing round by Zurich-based small-business lender Teylor. “While 2025 presented ongoing challenges, the UK continues to stand out as Europe’s fintech hub, attracting over a third of total EMEA funding. Encouragingly, we are beginning to see momentum return as regulatory clarity improves and market conditions stabilise,” noted Hannah Dobson, KPMG UK’s head of fintech.
Mostly due to contrasting methodologies, data sources and definitions of what constitutes a “fintech” company and transaction, however, Innovate Finance’s fintech-investment figures for 2025 differed markedly from those of KPMG. An independent industry body for the global fintech community in the UK, Innovate Finance’s “FinTech Investment Landscape 2025” report found that at $3.6 billion, UK fintech investment last year was 0.4 percent higher than in 2024, but remained a hefty 37 percent below 2023 levels.
The second half (H2) of 2025 was significantly brighter than the first half (H1), with $1.9 billion raised during the latter six months of the year—11 percent more than the January-June period—suggesting a positive swing in momentum going into 2026. “Key UK deals included FNZ ($650m, Wealth Management), Rapyd ($300m, Payments), Dojo ($190m, Payments & Merchant Acquiring), Quantexa ($175m, Data Analytics), and Fnality ($136m, Payments),” the report added. “These top deals highlight a resurgence in Payments and B2B infrastructure platforms, which dominated capital raises. Overall, the data points to early signs of an upturn in the UK FinTech sector.”
The UK also retained second place in Innovate Finance’s global ranking behind the United States, just edging out India, which attracted $3.4 billion of investment. But while India’s funding was committed across 253 deals, the UK achieved more than double the deal count, at 534, which the report attributed to “a broader and more diversified investment landscape in the UK”.
Janine Hirt’s assessment of the figures was that they showed the “resilience, strength, and global competitiveness” of the UK fintech ecosystem. “Attracting a strong $3.6 billion in investment in 2025—and again claiming second place globally behind only the United States—the UK has once again proven its credentials as a world-leading financial innovation and technology hub,” Innovate Finance’s chief executive said. “Our thriving UK FinTech sector is driving growth and productivity across the country, supporting consumers with the cost of living, facilitating greater financial inclusion, and creating thousands of jobs each year.”
Indeed, while it may be tempting to attribute the UK’s entire fintech strength to London’s preeminent status as a leading global financial hub, evidence from more recent years suggests that geographical dispersion has been pivotal to the sector’s success across the country. The North of England, Wales and Scotland have all seen healthy growth in fintech-funding numbers in recent years, significantly raising their profiles as thriving clusters in their own right.
Home to around one-fifth of the UK’s population, for instance, the North of England has emerged not only as a crucial economic region for the country, but also home to some of the leading fintech clusters, especially in key urban centres such as Manchester, Leeds, Newcastle and Liverpool. “Fintech and technology in the North of England are growing rapidly, with hubs in Leeds, Manchester, Liverpool and Newcastle benefitting from strong universities, lower costs, and support networks like FinTech North,” according to James Brown, chief revenue officer at Findr, as quoted in Whitecap Consulting’s “North of England FinTech Report 2025”. “Opportunities include the Northern Powerhouse Investment Fund II, open finance initiatives, and devolution deals that can boost scaleup potential.”
Truth be told, however, UK fintech firms’ prospects over the coming years will be increasingly determined by how they manage escalating competition. Fintech firms are no longer battling only the traditional banking industry; they are also competing with one another, not to mention Amazon, Apple and Google as big tech moves more deeply into financial services. Pricing competition has also intensified, with margins in payments and foreign exchange coming under pressure as the competition for market share intensifies.
Incumbent banks are also responding more meaningfully to fintech disruption by investing in their own digital capabilities. Institutions such as Lloyds Banking Group and NatWest Group have significantly improved their digital offerings, reducing the advantage that fintech firms once held in user experience and thus narrowing the gap between traditional and digital banking services. As such, customers now have access to similar functionality across a wider range of providers, making differentiation more challenging.
As for fintech’s outlook for this year, KPMG’s global and UK head of financial services, Karim Haji, has projected the sector to be characterised by a more balanced phase, one defined by “selective growth, clearer paths to profitability, and improving liquidity”. Indeed, that selective growth is already being observed to some degree in the UK, with financing activity becoming more concentrated in later-stage rounds and more established firms.
This shift largely reflects the tighter monetary environment of recent years, with higher interest rates raising the cost of capital and prompting investors to shift their focus towards profitability and cash flow. Larger fintech firms have generally been better positioned to navigate these changes, with the growth of companies such as Revolut and Wise continuing to be supported by diversified revenue streams and strong customer bases.
Wise has demonstrated a path towards sustained profitability, benefiting from its position in cross-border payments. Its public-listed status also implies a level of financial competency that broadly aligns with the current investor environment. And although still privately held, Revolut has expanded its product offering significantly, moving beyond payments and transforming into a global financial “super app” that delivers enhanced core banking, wealth management, credit products, trading and lifestyle services.
UK fintechs that have relied more heavily on continuous venture capital (VC) funding to support growth without identifying clear paths to profitability have not fared as well under this evolving climate. Many firms in this bracket have been forced to cut costs, reduce headcounts or seek alternative funding sources. As such, UK fintech appears to be gradually transitioning from a growth-driven phase to one that rewards sustainability and scale.
Nonetheless, the sector as a whole in the UK is widely expected to remain dominant across the wider region for the time being. Lucy Rigby, for one, is expressing considerable bullishness for 2026. “UK fintech continues to show real strength and resilience, with an upsurge in investment in the second half of last year and the UK firmly established as Europe’s leading fintech hub,” the economic secretary to the Treasury remarked following the release of Innovate Finance’s “FinTech Investment Landscape 2025” report. “That momentum gives us confidence going into 2026, and I want to double down on it—backing UK innovators and wealth creators, and ensuring investment flows to the fintechs that will drive this country’s future prosperity.”
KPMG’s Hannah Dobson, however, cautioned that to maintain its position as Europe’s leading fintech centre, the UK “must remain an investor-friendly location, a place where innovation and entrepreneurship can thrive and be supported”. With other countries quickly gaining pace, moreover, Innovate Finance’s Janine Hirt said she could see the UK being able to maintain its leading position if it can “push ahead on delivering key regulatory reforms with speed, increase access to growth capital, and continue to foster an environment which is attractive for both domestic and international entrepreneurs and investors”.