Investment in UK fintech companies fell to its lowest level in a decade during the first half of 2026, even as global funding surged and investors continued pouring money into artificial intelligence.
UK fintech firms attracted just £1.8 billion across mergers and acquisitions, private equity and venture capital deals during the first six months of the year, according to KPMG’s latest Pulse of Fintech figures.
The total was down by roughly two-thirds from the £5.4 billion recorded in the first half of 2025 and represented the weakest first-half result since KPMG began publishing the report in 2016.
The decline was accompanied by another warning sign: fewer transactions.
There were 205 UK fintech deals completed during the first half, covering M&A, private equity and venture capital. That was the lowest deal count in the decade covered by the data.
Despite the slowdown, the UK remains the largest fintech investment market in Europe and the wider Europe, Middle East and Africa region. Its lead, however, has narrowed considerably.
Britain accounted for only 22% of total EMEA fintech investment during the first half of 2026, compared with 68% at the end of 2025.
The change does not mean the UK has suddenly lost its position as Europe’s main fintech center. Its 205 deals were still more than the total completed across all other European countries combined and placed the UK second globally behind the United States by deal count.
Instead, the numbers show how dramatically capital has moved toward a smaller group of large transactions elsewhere.
Global fintech investment more than doubled to £75.8 billion during the first six months of 2026, up from £37.1 billion in the same period a year earlier.
The Americas accounted for more than 80% of that total, attracting approximately £63.8 billion across 1,120 transactions. The United States alone generated £59.4 billion across 933 deals.
That makes the UK slowdown particularly notable. It is not simply part of a worldwide retreat from fintech. Global capital is available, but it is being distributed very differently.
One area where British fintech continues to attract investment is artificial intelligence.
AI-related UK fintech companies raised £445 million across 79 deals during the first half, up from £382 million across 67 transactions a year earlier.
AI therefore accounted for roughly one-quarter of all UK fintech investment, compared with about 16% in the first half of 2025.
The figures suggest that investors are becoming much more selective rather than abandoning fintech completely.
Companies using AI to automate financial processes, improve risk management, detect fraud, reduce operational costs or modernize financial infrastructure are continuing to receive funding even while broader investment conditions deteriorate.
KPMG UK Head of Fintech Hannah Dobson described the first six months of 2026 as challenging, with overall funding returning to levels comparable with the early stages of the pandemic.
But she pointed to AI as one of the areas where demand remains strong despite weakness across the wider market.
The latest numbers also need to be viewed against an unusually strong comparison period.
UK fintech investment in the first half of 2025 was boosted by several large transactions, including BlackRock’s multibillion-pound acquisition of private-markets data provider Preqin and substantial investments involving payments company Rapyd and wealth technology group FNZ.
Large acquisitions can have an outsized effect on KPMG’s figures because the report combines venture investment, private equity and M&A rather than measuring startup fundraising alone.
Removing one or two multibillion-pound transactions from a six-month period can therefore cause total investment to fall dramatically even when smaller deals continue to take place.
Still, the decline in transaction numbers indicates that the weakness cannot be explained entirely by the absence of megadeals.
Fundraising conditions have become more demanding as investors focus more heavily on profitability, sustainable revenue and businesses capable of producing clear returns from technology spending.
KPMG also expects fundraising conditions to remain difficult during the second half of the year, with geopolitical uncertainty and broader economic pressures continuing to affect investment decisions.
AI may remain the exception.
While overall fintech capital has fallen sharply, the increase in both the amount invested in AI-focused companies and the number of AI deals suggests the technology is becoming less of a separate fintech category and more of a requirement for attracting capital.
The UK Has a Capital Problem, Not a Fintech Problem
A fall from £5.4 billion to £1.8 billion looks alarming. A decline in the UK’s share of EMEA investment from 68% to 22% looks even worse.
But neither number necessarily means Britain’s fintech industry has suddenly stopped producing good companies.
The more useful interpretation is that investors have changed what they are willing to pay for.
During the fintech boom, a company could raise substantial amounts based on rapid customer growth, a large addressable market and the possibility that profits would eventually follow.
That argument is much harder to sell in 2026.
Investors now have other places to put their money, and AI has become one of the strongest competitors for growth capital. A fintech company is no longer competing only with another payments startup or digital bank for investor attention. It may be competing with an AI infrastructure company promising dramatically faster growth.
That helps explain why AI-related fintech funding is rising while almost everything around it contracts.
It is also worth looking carefully at the £5.4 billion comparison from 2025.
A large part of that figure came from a handful of major deals. When one multibillion-pound acquisition disappears from the following year’s data, the headline funding number can collapse without a comparable collapse in the underlying ecosystem.
The deal count is therefore more concerning than the funding total.
Only 205 transactions were recorded in the first half. Fewer deals mean fewer companies are getting through investment committees at all, not simply that the biggest acquisitions happened elsewhere.
That points toward a genuine flight to quality.
For established fintech companies, this may not be entirely negative. Businesses with strong revenue, proven technology and realistic paths to profitability face less competition for capital and talent. They may also find opportunities to acquire weaker rivals that cannot raise another round.
For younger startups, the environment is much less comfortable.
A company that might have survived several years ago by raising another venture round may now have to cut spending, reach profitability earlier, accept a lower valuation or sell itself.
The result could be a healthier fintech industry, but probably a smaller one.
There is also a bigger question for the UK.
Britain has spent years presenting fintech as one of its most successful technology industries. London combines major banks, venture investors, financial-market infrastructure, regulators and a deep pool of financial talent in one city.
Those advantages have not disappeared.
But being Europe’s largest fintech hub matters less if the largest pools of new capital increasingly choose the United States.
The UK can still claim more fintech deals than the rest of Europe combined. What it cannot claim from these figures is the same dominance over where the money is going.
AI provides the clearest hint about what comes next.
Fintech companies that simply digitize an existing financial product may find capital increasingly difficult to attract. Companies that can use AI to materially lower costs, automate complex work or build new financial infrastructure are still receiving attention.
The £1.8 billion headline therefore tells two stories at once.
Traditional fintech fundraising is experiencing one of its most difficult periods in years.
But capital has not vanished. Investors have simply become much more demanding about which version of fintech they are willing to fund.