UK Fintech Funding Falls to a Decade Low as AI Takes a Quarter of the Pot

UK fintech investment fell to £1.8bn in the first half of 2026, the weakest six months since KPMG began tracking the sector in 2016, according to the firm's latest Pulse of Fintech report.

The figure is down from £5.0bn in the same period last year, a fall of roughly two thirds, and sits alongside 2020 as the low point of the past decade. Deal count told the same story: 205 transactions across M&A, private equity and venture capital, down from 281 a year earlier and the lowest in ten years.

The retreat has also cost the UK its share of the regional market. Britain remains the largest single destination for fintech capital in Europe and across EMEA, but it accounted for 22% of EMEA investment in the first half, against 68% at the end of 2025.

KPMG's UK release, published on 24 August, points to a market that has not stopped deploying capital so much as narrowed where it will.

"It has been a challenging start to 2026, with levels of investment on a par with those seen during the first wave of the pandemic," said Hannah Dobson, head of fintech and partner at KPMG UK. "Investors are continuing to back areas where they see long-term structural growth, even as capital deployment becomes more selective."

Where the money did go

Artificial intelligence was the clearest exception. AI-related UK fintech investment reached £445m across 79 deals, up from £382m across 67 deals a year earlier. More telling than the absolute rise is the share: AI accounted for 25% of all UK fintech investment in the first half, against 16% in the same period of 2025. On that measure the UK leads Europe, ahead of France at £244m and Germany at £134m.

Cybersecurity saw a smaller but sharper move, drawing £90m across seven deals, or 5% of the total, against effectively nothing a year earlier.

The largest individual UK deals were concentrated in payments and market infrastructure: a £543m private equity investment in Ebury, £129m into Paymentology, and a £124m round for 9fin.

What it means for banks

For banking executives watching the supplier market, the pattern matters more than the headline. A two thirds fall in capital with a rising AI share suggests consolidation ahead among the subscale vendors, and a shrinking pool of independently funded challengers in areas such as core banking, onboarding and payments orchestration.

It also arrives at an awkward moment for the UK's competitive positioning, with Singapore committing public money to its own ecosystem and the US absorbing the bulk of global fintech capital.