UK Remains at the Forefront of the Fintech Revolution

Despite fierce competition, the UK remains at the forefront of the fintech revolution according to the ‘Finance for Fintech’ report, launched recently by London Stock Exchange Group and TheCityUK.

The independent survey, carried out by YouGov, interviewed over 400 fintech companies across eight countries, all of which have had at least Series A funding rounds or above, and provided interesting insights into the global fintech scene.

Bullish UK fintech scene

UK fintechs are bullish about their growth prospects.

The research highlighted that fintech companies operating in the UK expect to grow by 88 per cent over the next three years, 8% higher than the overall average.

Vital to this growth is raising finance and this process is reportedly more straightforward for UK fintechs in public markets than those operating in other countries, making it an attractive location for fast-growth companies. Chancellor Philip Hammond recently supported this view, pointing out that investment in UK fintech more than doubled last year, outpacing the funding of EU rivals such as Germany.

Interestingly, fintechs surveyed placed the UK as the third best  location for businesses seeking to grow their international footprint, only behind the US and China.

Fintech Revolution in Europe?

That said, competition is heating up.

Europe increasingly seeks to strengthen its position as a regional fintech hub. On 8 March, the European Commission announced an action plan on how it will do just that; new rules that will help crowdfunding platforms to grow across the EU’s single market.

The impact of this will be interesting as one of the primary barriers to fintech growth is competition according to 43% of those surveyed.

Regulation

Fintechs require a supportive global regulatory environment to flourish.

You have to applaud the FCA’s exploration of a potential global regulatory sandbox following the success of its UK version. The UK version, launched in 2016, helped fintechs to test innovations with real customers in the live market but under controlled conditions.

The global sandbox could allow firms to conduct tests from London into different jurisdictions at the same time, enabling regulators to collaborate to solve cross-border problems.

This has the potential to strengthen London’s position as a destination for global fintech companies as they can come from all around the world to test their products and find out how they can expand internationally.

Fintech is by definition without borders.

The research shows that fintechs across the world are becoming increasingly cross-border in their growth aspirations with 72% of the 400 companies surveyed planning to expand into new countries. 73% believe they will need to move into new or develop existing market sectors in order to achieve this growth and almost three-quarters believe long-term growth will be driven, at least in part, by new technologies.

It is worth noting that those who have reached Series D rounds or above have the biggest appetite for expansions and anticipate achieving a monumental growth of 320%.

While fintechs seek global expansion, it is important they don’t lose sight of the importance of being located close to the core financial hubs as crossover will, by and large, determine their success.

It is clear that in order for fintechs to thrive and continue to transform the global financial services sector, they need access to finance, a supportive global regulatory environment and proximity to the global financial services sector. The UK currently offers all three.

The report demonstrates that while the UK remains at the forefront of the fintech revolution, it must continue to innovate and work collaboratively in order to maintain its leading position, especially with Europe hot on its heels.

 

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