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Investment in UK fintech companies continued its upward trajectory in 2021, attracting $11.6bn (£8.56bn) in capital and outpacing the rest of Europe.

A year of “mega-rounds” by the likes of Monzo, Starling and Revolut helped total UK fintech investments surge by 217% year-on-year.

Data compiled by Innovate Finance, a UK fintech industry body, showed there were a total of 713 UK fintech investment deals – 11% of the global total.

The UK cemented its position in second place for fintech investment, trumping the $6.3bn raised by Indian fintechs and the $4.4bn raised by German firms.

However, UK fintechs trailed behind the US, which brought in a total of $46bn in 2021.

Fintech has long been the biggest pull for UK tech investment. In 2021 it attracted nearly half (45%) of all European fintech investment.

While London is home to the lion’s share of fintech companies, there are signs that tech hubs outside the capital are attracting more funding. The report found that investment in fintechs outside of London and the South East rose from $206m in 2020 to $696m in 2021 – a 237% jump.

“The increasing levels of regional investment indicate promising signs that UK Fintech is growing beyond London, and areas throughout the UK are fast establishing strong regional hubs,” the Innovate Finance report noted.

Janine Hirt, CEO of Innovate Finance, said: “Our fintech sector is reaching new levels of maturity, and investors are responding to the growing market demand for the products and services our entrepreneurs are able to provide. We are on the right trajectory in terms of levels of funding and now it’s time to also properly address the funding gap for underrepresented founders, if we are to create a truly sustainable and forward-looking sector.”

The surge in UK fintech investment comes as the government implements new measures to ensure the country remains an attractive fintech hub post-Brexit.

Recommended measures included the creation of a regulatory fintech “scalebox” to provide “additional support to growth stage fintechs”.

The report, known as the Kalifa Review, also recommended ways to make the UK a more attractive destination for initial public offerings (IPOs).

“We proved that the UK fintech sector is more than a force to be reckoned with, maintaining our position as the number one fintech investment destination in Europe, and number two in the world, second only to the US,” added Lord Gerry Grimstone, minister for investment.

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