The UK fintech investment fell 67% year over year to £1.8 billion (about $2.46 billion) in the first half of 2026, KPMG data cited by Bloomberg yesterday (Sunday) showed. That was the lowest level since at least 2016, according to the figures compiled by PitchBook.Global investors moved the other way. Fintech investment worldwide more than doubled to £75.8 billion from £37.1 billion, while the UK's share of funding across Europe, the Middle East and Africa fell to 22% from 68% at the end of 2025.The decline follows a £5.4 billion first half in 2025. The latest tally covers 205 mergers and acquisitions, private equity investments and venture capital deals.AI Draws One Pound in Every FourAI-related fintech companies raised £445 million (about $607 million) across 79 deals during the period. Their share of UK fintech investment rose to 25% from 16% a year earlier.Outside fintech, AI drove most of Britain's venture increase. UK startups raised $17 billion in H1 2026, up 102% year over year, according to HSBC Innovation Banking and Dealroom.AI companies accounted for $12.6 billion, or nearly three-quarters of that total. They also secured all four UK venture rounds worth at least $1 billion during the half.Fintech was not the main source of growth in British technology funding this year. That reverses the picture from 2024, when fintech was the UK's most-funded technology sector.Late-Stage Funding Accounts for Most of the DropA separate Tracxn dataset put UK fintech funding at $1.5 billion, or about £1.1 billion, in H1 2026. That measure fell 26% year over year and 35% from the second half of 2025.Tracxn counted funding rounds rather than KPMG's broader mix of M&A, private equity and venture capital. Its stage-level data show where investors pulled back.Late-stage funding dropped 45% year over year to $830 million. Early-stage investment rose 27% to $562 million, while seed funding was nearly unchanged from a year earlier and increased 93% from H2 2025.Large transactions had pushed the prior-year KPMG total higher. BlackRock's £2.3 billion acquisition of Preqin and £371.5 million investments in Rapyd and FNZ together supplied about 56% of the £5.4 billion recorded in H1 2025.The first quarter of 2025 accounted for £3.9 billion across 125 deals, followed by £1.5 billion across 91 transactions in the second quarter. KPMG's broader measure can therefore move sharply when a large takeover enters or leaves the comparison."There are pockets of significant demand, particularly in AI," Hannah Dobson, KPMG UK's head of fintech, said in the statement cited by Bloomberg.Dobson said investors had become more selective and were backing areas where they saw longer-term growth. Tracxn's figures locate most of the pullback among mature fintechs seeking larger rounds.UK Keeps Europe's Largest Deal PipelineFinTech Global counted 187 UK fintech deals in H1 2026, three more than a year earlier. The country supplied 35% of European deal activity under that firm's methodology, ahead of France at 11% and Germany at 8%.British companies took six of Europe's 10 largest fintech transactions. The biggest was a $748.1 million funding package for Santander-owned payments provider Ebury, while issuer-processor Paymentology raised $175 million.The deal counts are not directly comparable because the providers use different definitions and update their databases as transactions are disclosed. That issue also affects KPMG's year-over-year comparison.Bloomberg's latest figures put the prior-year UK count at 281 deals. KPMG's original H1 2025 release reported 216, and its current underlying tables were not publicly available when this article was prepared.This article was written by Damian Chmiel at www.financemagnates.com.