A recent report revealed UK fintech investment experienced a five-year low in 2025, falling by a fifth from $13.4bn, despite the highs recorded on a global investment scale. Perhaps unsurprising given the tumultuous few years, but any drop in R&D investment is usually triggered by concerns over short-term uncertainty. Those most likely to emerge from this downturn with a genuine competitive advantage are those looking past the short-term spend to the long-term gains, and making the decision to cut their wings.
Over the past decade, fintech growth has been defined by speed: rapid scaling, aggressive customer acquisition and continuous fundraising. But today’s market is very different and prone to dramatic changes, shaped by regulatory scrutiny and tighter capital markets. Fintech leadership teams are therefore being forced to make harder, longer-term decisions about where value actually comes from.
Faced by these pressures, it’s been a natural response to pull back on R&D growth, but in reality, this knee-jerk reaction is what distinguishes the cautious from the most resilient fintechs who are already doubling down on innovation, using sustained R&D investment as their secret weapon for long-term advantage.
Two fintechs with two very different futures
In times of uncertainty, firms are left with two options:
- Underinvest in R&D to save money in the short-term but face commercial risks in the future
- Take a more strategic, long-term approach to uncover better opportunities and keep up investment
To understand why R&D investment decisions matter so much, let’s consider two CFOs navigating the same difficult quarter.
CFO A: Cuts R&D spend
Market pressure is growing and the board wants costs down as the business faces a challenging year ahead. In response, CFO A reduces headcount across the R&D team and pulls back on subcontracted development work. Immediately, the quarterly numbers look better and the board is happy.
But 18 months later, the product roadmap has stagnated, and now there’s greater pressure to ramp up development again. The problem is, the talent that was removed is not proving difficult to get back within the new, accelerated timelines. And crucially, the R&D tax relief that could have partially offset the original spend was never claimed, because there was nothing to claim.
As a result, CFO A faced a reduced innovation pipeline, overlooked R&D tax relief opportunities and a loss of talent that stalls development. So in the end, short-term savings weakened their long-term competitive position.
CFO B: Protects R&D spend
CFO B faces the same board, the same pressure, all in the same quarter. But they take a different view of the numbers, recognising the R&D opportunity.
The CFO protects the R&D budget, instead choosing to invest in infrastructure and team capability, and works with specialists to ensure their R&D tax relief claim is structured to capture the full scope of qualifying activity. In the short term, growth is still slow, but the company emerges from the downturn with a stronger product and a tax relief claim that partially funded the investment.
In the longer term, CFO B achieved greater R&D tax relief recovery (£134k–£1.92m depending on scale), accelerated product development and a stronger positioning when market conditions improve. They faced higher upfront spend but gained a tangible long-term advantage.
The difference between these two outcomes comes down to the quality of the decision made under pressure.
A closer look at fintech investment
EmpowerRD’s UK Fintech R&D Benchmark Report 2026 draws data from 35 UK fintech companies and 58 audited claims across venture, growth and established stages. It identifies which areas of their business qualify for R&D tax relief, and benchmarks fintechs against their peers to uncover further claim opportunities.
Across the board, the average fintech claim came in at £513,000 in qualifying expenditure, with the total spend reaching £49.9 million.
But two findings that really stand out are that employee costs account for 62% of qualifying spend, while 38% sits in categories that many businesses miss entirely (which equates to around £19 million). Subcontracted R&D, software and consumables, for example, are consistently under claimed, particularly at the growth stage, where non-payroll spend accounts for just 11.6% of the average claim, compared to 50.2% at venture stage and 43.1% at established companies.
How fintech leaders can balance resilience and growth in times of uncertainty?
Crucially, fintechs don’t need big budgets to navigate these periods effectively. There just needs to be a change in mindset when it comes to R&D, which starts with embedding R&D into the strategy cycle. This means planning qualifying activity in advance, rather than reconstructing it at year-end, as this consistently produces larger and more defensible tax relief claims.
The most successful fintechs are those that can strike a balance between innovation and resilience, so continuing to invest while maintaining financial discipline to protect short-term performance and optimise long-term value creation.
In an industry defined by change, sustained investment in R&D is the foundation for staying competitive.
