There's little doubt about it: UK Fintech is hot right now.
With UK fintech rocketing, particularly in the B2B Space, startup ventures around the world are moving into the market. While the opportunities are undoubtedly real, the risks are high — especially if the move is not thought through.
Technology serving the financial sector has become a massive growth area in the UK economy. London fintech alone now generates revenues totalling £6.6 billion, with over 75,000 people working in financial technology UK wide. That number is set to pass 100,000 before 2030, according to fintech umbrella body Innovate Finance.
According to this year’s EY Global Fintech Adoption Index, fintech challengers are “no longer just disrupters, but sophisticated competitors, with an increasingly global reach”. In the UK, 71% of digitally active adults engage with at least one fintech service — well above the global average of 64%.
Challenger banks — or ‘neo-banks’ as they are often now called — are key players in the UK fintech revolution. Investment is pouring into the likes of Monzo to Starling to Atom, following the billion-dollar ‘unicorn’ milestone reached by other UK-based fintechs including Transferwise ($2.7bn) and Funding Circle ($1.5bn).
A report in September by London & Partners, the Mayor of London’s promotional agency, detailed record investment in UK fintech, with over $2 billion invested in London in the first eight months of the year alone across 114 deals. London has now overtaken New York for fintech investment.
L&P says that, of the 10 largest European deals in 2019 to date, London-based companies have accounted for half, totalling $1.8 billion. Big deals included Monzo ($143m) and World Remit ($175m), with other investment winners including OakNorth ($440m), Checkout.com ($230m) and Iwoca ($195m).
Dhaval Gore, L&P’s head of financial, business services and technology, says the UK capital is the natural home of fintech because it
provides access to everything a business needs to succeed, all contained and collaborating within one city. A fintech entrepreneur can pitch to a VC over breakfast, chat with a regulator over coffee, hire top tech talent at lunchtime, present to a global financial institution in the afternoon and network with fellow entrepreneurs in the evening.
London is also conveniently positioned within a time zone that allows the capital to administrate financial transactions globally, from the Americas to Asia in a single business day.
The growth of the fintech market is naturally making the UK increasingly attractive to overseas ventures looking to global expansion. One stand-out example of this is business accounting SaaS platform Xero. Founded in New Zealand in 2006, the venture scaled up rapidly after entry to the UK to become one of the fastest-growing global fintechs, backed by a public listing and post-IPO equity that has taken it to 2500 staff and 2 million subscribers.
The maturing of the UK market is certainly very promising for B2B fintech ventures, many of whom are starting to work with and support each other. A great example of this is the recent B2B tie-up that the Transferwise has made with GoCardless — allowing business customers to collect recurring payments from overseas.
With growing maturity follows investment — and one of the most significant in the B2B fintech space in recent times has just been confirmed, in the form of a new €150m fintech fund from Middlegame Ventures targeting early-stage financial services disrupters working with other businesses.
Fintech success not gauranteed
Sometimes failure comes down to a lack of experience and local market knowledge, but too often it is simply down to inadequate planning.
Despite the precedents, and the availability of investment, the UK is no simple fintech goldrush with guaranteed newcomer success. Not every venture succeeds in fintech or any other space — far from it. Here at Newfound, we have seen too many companies — often highly successful in their market of origin — fail spectacularly when entering new markets. Sometimes that failure comes down to a lack of experience and local market knowledge, but too often it is simply down to inadequate planning.
Our CEO Peter Gillingwater has been a witness to many startups struggling with global expansion over the years which is one of the core reasons he started Newfound. He says:
Too many firms in our experience try to get market ready themselves, and failure to plan properly can be fatal — not just for the expansion but for the entire business
As a market entry and strategic hiring specialist, Newfound has helped numerous tech businesses to get themselves established in the UK, offering the right kind of support around go-to-market planning and key hiring at the right time for those ventures.
We helped peer lending platform Credi with market introductions to key contacts on the ground, and backed payments venture Laybuy in its search for the best top talent. Fintech marketplace Maestrano needed a new UK CEO — and as a result of Newfound’s strategic support, made the call to flip its global HQ to London.
This month, Newfound supports & welcomes to London six high-performing Canadian fintech startups with ambitions to expand their business to the UK. During that visit — organised by Toronto Finance International — we are accompanying the delegation to key events and facilitating commercial & strategic meetings with banks, partners & key industry contacts in London.
Prominent on the itinerary for the Canadian delegation is FinTech Connect 2019.Six thousand delegates from around the world converge on London’s ExCeL Centre — demonstrating both the scale and the ambition of London and UK fintech.
Over at London & Partners, Dhaval Gore agrees that companies that want to come to the UK must do all the planning they can ahead of market launch. But he remains upbeat about the prospects for new arrivals — because of the twin pulls of talent and money.
Despite challenging times, London will continue to be home to world-class talent due to its fundamental strengths in finance, insurance, technology, professional advice, research and its relentless drive to evolve and create new ideas and business models.
With over a third of all European funding being poured into London fintechs, there’s an incredible ecosystem present in the city, one difficult to match anywhere else in the world.