Joe Channer, CEO of Delta Capita, on why ageing private equity fintech assets are pushing capital markets fintech into an era of industrialisation.
For years, fintech thrived on a simple assumption that cheap money would remain abundant long enough for scale to solve everything else. A plethora of private equity and venture investors poured borrowed money into esoteric businesses solving very specific problems across capital markets. Growth mattered more than profitability and client concentration risk was tolerated. What followed was a culture of rewarding expansion over efficiency with many believing the music would never stop.
There is just one small problem. While the music may not have stopped exactly, it has certainly become quieter. Higher-for-longer interest rates have fundamentally changed the economics of fintech investing. Capital is much more expensive, refinancing has never been harder, exit windows remain narrow, and on top of all this, valuation multiples have compressed sharply from their post-pandemic sugar rush highs.
The consequences are now becoming very stark. UK fintech investment totalled around $11 billion last year, down from about $13.4 billion in 2024, according to KPMG. A total of 418 deals dedicated to fintechs in the UK closed last year, down from 527 in 2024. Numerous private equity firms are sitting on ageing fintech investments acquired or funded during the low-rate era. Many of these businesses are seven to ten years into investment cycles that were originally expected to end through IPOs or secondary buyouts.
Instead, many investors are facing a difficult reality of owning good businesses trapped in a much harsher financial world. The irony is that, more often than not, we are not talking about failed fintech firms here. On the contrary, many have credible products and institutional clients that include some of the world’s largest financial institutions. The trouble is that a lot are also frequently subscale, operationally expensive and overly dependent on a small number of clients.
In a higher-for-longer interest rate world, these issues become much harder to finance. This is creating a structural shift in the fintech market that receives far less attention than AI headlines or digital asset speculation. Capital markets fintech is now quietly entering a new era of industrialisation.
The sector is moving from innovation economics to infrastructure economics. And that distinction really matters. During the fintech boom of the 2010s, investors often backed standalone products designed to disrupt narrow parts of the banking value chain. Today, investment banks themselves are moving in completely the opposite direction. They are reducing vendor sprawl, rationalising operational complexity and favouring fewer strategic providers with greater scale and broader infrastructure capability. At the same time, AI and automation are increasing the importance of industrially friendly operational environments. Fragmented tech stacks and heavily customised workflows are becoming much harder to maintain economically.
Consequently, fintech businesses face two simultaneous pressures of private equity demanding returns and clients needing larger-scale infrastructure. It is that combination which is fundamentally reshaping the market as we know it. As such, a growing opportunity now exists around what might be called trapped fintech assets. These are businesses with strong tech, but insufficient economies of scale to thrive independently.
However, if placed on larger operational platforms, these assets can become much more attractive and the economics will improve materially. Firstly, duplicated overheads can be removed and existing cloud, operational and governance infrastructure can be reused. In addition, distribution can expand through established institutional client networks. And perhaps most importantly, products that traditionally struggled to scale independently can become commercially viable inside wider managed infrastructure.
Instead of being traditional opportunistic consolidation, this reflects a wider shift in how capital markets infrastructure is evolving. For decades, investment banks largely owned and operated operational infrastructure internally. Increasingly, however, infrastructure is now becoming externalised and mutualised across the industry. That exact dynamic is now beginning to reshape fintech.
The winners may not be the firms that built the most products during the private equity boom years. They may instead be the firms best able to industrialise, modernise and scale the infrastructure left behind after the era of cheap money ended. If the fintech gold rush of the 2010s was built on abundant capital, as sure as night follows day, the next era will be built on operational leverage, infrastructure scale and institutional resilience.
Joe Channer is CEO of Delta Capita, the capital markets consulting, technology and managed services provider.
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