UK fintech companies experienced their lowest level of private equity, venture capital and merger activity in a decade during the first six months of 2026, driven by a sharp drop in growth capital.
According to new findings from KPMG, total investment in the sector fell to £1.8bn across 205 VC, PE and mergers and acquisitions (M&A) deals in the first half of the year.
The performance represents a two-thirds decline from £5bn across 281 deals in the same period in 2025 and marks the lowest investment total since 2016.
Despite the broader pullback, private equity buyouts and venture rounds provided the largest individual injections of capital into the sector. Cross-border payments platform Ebury secured a £543m PE investment, while issuer-processor Paymentology completed a £129m PE deal. Financial data startup 9fin raised £124m in VC funding.
Venture capital and private equity investors concentrated their remaining deployable funds into artificial intelligence and cybersecurity. AI-related fintechs attracted £445m across 79 deals, accounting for 25% of all UK fintech capital in the first half of 2026, compared to £382m across 67 deals in the previous year.
Cybersecurity fintechs saw investment rise to £90m across seven VC and growth deals, up from £40,000 across three deals in the first half of 2025. The shift moved the UK past Germany as the primary destination for cybersecurity funding in Europe.
Globally, venture capital activity remained robust in select markets, led by the US with £12.3bn in VC funding. Globally, AI fintechs attracted £15.7bn across VC, PE and M&A deals, while total global fintech funding reached £75.8bn despite total deal volume falling from 2,501 to 2,100 transactions.
Hannah Dobson, head of fintech at KPMG UK, said: “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. That said, there are pockets of significant demand, particularly in AI, where investment is gaining prominence even as the wider market has softened.
“Investors are continuing to back areas where they see long-term structural growth, even as capital deployment becomes more selective. Cybersecurity investment also increased year-on-year, with a clear overlap with AI as the whole sector navigates the age of frontier AI models and the opportunities and threats these create for businesses.”
Dobson added: “While there are bright spots, the geopolitical and economic headwinds facing firms only stand to intensify as the year continues and the second half of the year is likely to remain challenging for fundraising.”
Karim Haji, global head of financial services at KPMG, said: “While much of today’s investment is focused on the largest and highest-quality deals, the broader fintech market is gaining momentum. AI is driving new opportunities, corporates are becoming more active, and private equity is looking at consolidation plays. Even smaller startups are attracting attention when they bring something truly differentiated to the table. Together, these trends point to a positive long-term outlook for the fintech sector.”
