Four Reasons Why British FinTechs Are Booming
There is no doubt that the UK is now a leading region when it comes to FinTech (Financial Technology) firms. From Monzo to Coconut, Revolut and Starling – British FinTechs are top of the list in terms of innovation, name recognition and funding from investors.
But how has the UK assembled this top-quality reputation as a base camp for some of the world’s most innovative financial technology firms? Here are some reasons why it is such a big player in the sector.
It’s In The DNA
The City of London is one of the world’s premier financial destinations, clearing trillions of dollars, pounds and euros’ worth of transactions every year. It is a hub of financial knowledge, technology and investment. Many of the world’s biggest investment banks have key offices in the City, while the sheer number of firms working in the sector means a talent and employment pool of thousands.
On top of that, the UK has world-class higher education institutions, attracting top talent from around the world. Many of these go on to the financial sector and become embedded in its culture. With such an array of talent, experience and infrastructure, it’s no wonder so many FinTechs have bloomed in Britain.
The Regulator Plays Nice
The UK’s financial regulator, government and major institutions such as the Bank of England, take a pretty positive approach to regulation and management of the financial sector. While understanding key consumer and market protections are essential, these organisations are also generally keen not to stifle innovation and the development of new businesses.
This creates a relatively healthy environment for FinTech firms to thrive in. Key licencing infrastructure such as e-money licences and banking licences, while requiring high levels of compliance, is not impossibly difficult to obtain, meaning many firms can take advantage of the tools they offer.
Plus, regulatory innovations such as Open Banking – which has obliged traditional financial providers to open up customer data to other firms – have led to a boom in FinTechs tapping into this rich seam of information, helping them to offer ever better insights and products to consumers.
Investment Is Roaring
There is little doubt that the UK is a premier destination for capital investment into great FinTech ideas and innovations.
Data from CB Insight indicates investment in FinTech in the UK has reached record levels, with some $4.9 billion of money flowing to UK-based companies in Q3 of 2021. This is more in one quarter than the whole of 2020 – where $4.57 billion was raised over the course of the whole year. In the year to October, FinTech investment had reached $11.4 billion.
A proliferation of firms have barely had to blink, even during the covid pandemic, for invest and interest in the businesses they are building. According to Lloyds Bank, some 46% of UK financial services firms are now looking at mergers and acquisitions in the space, suggesting many of these projects have proven to be highly competitive and successful.
FinTech Products Are Popular
Talent, regulatory environment and investment cash are all well and good, but without receptive consumers, firms wouldn’t make any headway. But the indications are pretty clear – people like FinTech products and innovations!
Nearly nine in 10 (86%) Brits now use FinTech products or apps according to research from Plaid and The Harris Poll. People are using an average of 2.8 FinTech products and services, with this figure expected to increase to 3.5 by April 2022.
The nub of it is FinTechs have boomed because there was a desire from users for new and innovative products. People, largely fed up with the lacklustre approach to technology from their legacy banks, have flocked to FinTech looking for new, fast and innovative ways to manage their financial lives. With more products and services arriving every week, this trend shows no signs of slowing down any time soon.
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