United Kingdom unveils £1 billion fintech fund in a bid to compete with Silicon Valley

The United Kingdom has been making giant strides in technology and innovation from attracting tech talent globally, making plans to become a science and technology superpower, committing £2.5 billion in quantum computing, to investing in clean tech initiatives.

In a move that would see increased investments in growth-stage financial technology companies, the UK is launching an investment fund with up to £1 billion ($1.27 billion) to bolster its global image as a fintech investment hub.

Backed by the likes of Mastercard, Barclays, and the London Stock Exchange Group, the Fintech Growth Fund aims to invest between £10 million to £100 million into fintech companies, ranging from consumer-focused challenger banks and payments tech groups to financial infrastructure and regulatory technology.

The fund, which is being advised by U.K. investment bank Peel Hunt, looks to support companies at the growth stage of their funding cycle, as they seek Series C rounds and above.

The venture was created in response to a 2021 government-commissioned review helmed by former Worldpay Vice Chairman Ron Kalifa and examined whether the U.K.’s listing environment is unattractive for tech firms.

It marks a rare commitment to a specialized fund focused on fintech backed by mega-industry players. While fintech-focused funds like Augmentum Fintech and Anthemis Group exist, the U.K. has yet to see a fintech-oriented fund that came about from a government-led strategy.

The London Stock Exchange has committed to a number of reforms to encourage fintech firms to float in the U.K. rather than in the U.S. — a particularly pressing step, following British chip design firm Arm’s decision to ditch a London listing for New York.

The move could also be an opportunity for financial heavyweights to access to expertise in the development of new technologies. Big banks and financial institutions are trying to advance their own digital ambitions, as they face competition from younger tech upstarts.

The U.K. is a hotbed of fintech innovation, only behind the U.S. when it comes to the scale of its fintech industry, he added. The U.K. is home to 16 of the world’s top 200 fintech companies, according to an analysis from independent research firm Statista.

The fintech industry is facing a period of turbulence, as rising inflation and macroeconomic weakness soften consumer spending. The valuations of companies such as Checkout.com, Revolut, and Freetrade have dropped sharply in recent months.

Britain has faced some industry criticisms that it poses barriers to fintech entrepreneurs and forces them to consider listings overseas — particularly after the country’s exit from the European Union, which has cast some shadow over the U.K.’s status as a global financial center.