From SoftBank’s historic loss of $27.6bn last month, to Nubank’s sell-off in tech equities after its New York Stock Exchange debut in December 2021, the financial technology sector has taken a huge blow in the last few months. A broad rout in tech stocks, rising global interest rates, and a regulatory crackdown in China, have created a volatile market for investors looking for profitable returns. As a result, this macroeconomic slump has cast a shadow over worldwide fintech confidence.

In the face of this, new research from global investment bank, JPIN, reveals that almost 1-in-3 (29%) of UK investors are still looking to back homegrown fintech – indicating the sector will still continue to enjoy support despite worldwide economic pressures and a looming Bank of England interest rate rise.

Fuelled by a global race for economies to become more digitalised, fintech is set to take centre stage in the next decade. The desire to combat inequality in access to financial services and addressing market failures, coupled with the growth of tech and data-based services, have made the fintech sector a driving component of future-proofing and growing a nation’s economy.

Even more importantly, the ESG-focused sector is set to enjoy the highest growth trajectory in fintech – according to KPMG – as worldwide corporate leaders begin to restructure their priorities to adopt net zero pledges. This will likely continue to drive corporate sustainability, with the development of new solutions to address climate-related issues and ESG objectives.

According to the same report, London takes second place as a top financial centre – after New York – having historically attracted large amounts of capital and skilled workers. In total, UK fintech investment soared to $37.3bn in 2021, up sevenfold from 2020. It’s clear that this sector has long enjoyed recognition and funding, with the pandemic also playing a vital part in changing customer expectations.

Following COVID, 70% of Brits are now using less cash, with a further 50% expecting to use more contactless payments – according to EY. Digital forms of payment have already been integrated into the global economic fabric and with this, it is evident that this trend will only continue to strengthen – despite the current blip in the fintech market.

Global funding in fintech reached $210bn in the last year, with VC investment making up over half of this ($115bn). Now, the cooling of the venture capital market has prompted some investors to sell their shares, even though a record £12.4bn was raised in UK startup funding in the first quarter of this year. With the Bank of England expected to raise interest rates today to 1.25%, it could potentially add more uncertainty to the current macroeconomic trends such as inflationary pressures and trade tensions, which hold back VC investor confidence. However, this unpredictable nature could be superseded by the long-term benefits and productivity that new forms of innovation can bring into the economy – ultimately providing a much-needed boost for society as a whole.

Nayan Gala, founder of JPIN, comments:

“It’s really encouraging to see that UK investors are still looking to back homegrown fintech startups in spite of current economic pressures. I think what’s particularly important is how these startups, especially in the fintech arena, are boosting financial inclusion that is enabling people to access financial services, increase their economic opportunities, and subsequently improve lives.

“Competition is fierce in the fintech arena from the likes of the US, Singapore, Australia, Europe and other emerging markets. The UK remains at the centre of European fintech investment, with British fintech attracting more funding than their counterparts in the rest of the EMEA combined. While we’re currently seeing a dip in the global market, fintech remain strategically significant for the UK’s economic growth prospects – therefore, this sector will likely still receive significant investment during difficult periods.”