The UK's thriving fintech sector is leading the way

In the years following the events of 2008-09, we have seen the emergence of a multitude of fintech companies that played a major role in innovating to create more personalised and user-friendly financial products centred around the customer. Growing levels of investment and rapid adoption are also helping to propel this sector into the mainstream and drive young, exciting fintech firms towards maturity.

Today, hundreds of exciting and innovative companies offer services that both enable fintech start-ups and larger, more established companies to be more responsive to customers. While technology already has a long track record of creating greater levels of financial inclusion by increasing transparency and reducing costs, major challenges remain.

For instance, according to the World Bank, whilst 1.2 billion people have opened a financial account since 2011, there are still 1.7 billion adults, nearly a third of all adults globally with no access to formal financial services.

Fintech firms are helping to solve this issue, in areas such as international payments, mobile banking and peer-to-peer financial services where British know-how is being exported to help address the unmet banking needs in Africa.

The mobile payment company, M-Pesa, was developed in cooperation between the City of London, Vodafone and DfID. It is now active across 10 African countries, Afghanistan and India, processing more than 6bn transactions with 18 million active users in Kenya alone. While brands such as TransferWise and Worldremit now facilitate people sending billions of pounds to help loved ones overseas.

This theme of industry innovation, consumer adoption and financial inclusion were once again on display at this year’s UK FinTech Week (UKFW), a week long series of events held in London, Manchester, Leeds and Edinburgh showcasing the UK as an epicentre of innovation. It is clear from this week’s events that the UK has become a global hub for fintech supporting companies from a very early stage to the end of the funding ladder.

As these companies move towards maturity, public markets such as London Stock Exchange offer support to a growing cohort of fintech companies, helping them access the funding they need to innovate for customers accelerate their growth and spread further the positive impacts of financial inclusion and wellness to society.

In keeping with the ethos of fintech, public markets are the ultimate example of the democratisation of finance. When companies conduct an initial public offering (IPO), their new shareholders – ranging from individual investors to UK global pension funds and mutual funds have the chance to share in their long-term success. But a public listing isn’t the end of its journey, it’s just the start: Amazon was valued at $430m at IPO; Microsoft at about $520m - both currently valued over $1.5tn - and ARM from the UK was over $430m when it listed in 1998 before being sold to SoftBank Group for $32bn in 2016.

In the fintech arena, we have witnessed a surge of issuances over the past 18 months - including Britain's largest peer-to-peer lender, Funding Circle, which raised over $500m in a landmark transaction. Beeks Financial Cloud, TruFin and IntegraFin also raised significant sums. More recently, payments fintech Network International raised $1.6bn on London Stock Exchange in April 2019, to become the largest ever Middle East and Africa (MEA) technology IPO on any exchange globally. In the last two years alone, approximately $3.5bn has been raised from fintech listings on London Stock Exchange markets.

The industry has also benefitted from the ongoing support of regulators and government organisations, who understand the potentially transformative impact of this new sector on the UK

and global economies. The FCA’s “regulatory sandbox” is providing fintechs an environment to test out their innovations, while HM Treasury’s Fintech Sector Strategy and an All-Party Parliamentary Group on fintech seek to provide a favourable environment for the sector in UK markets and around the world. EY recently recognised the UK as the world’s leading country for investment in its 20th edition of Global Capital Confidence Barometer, a global ranking of the top investment destinations published in April 2019.

This approach is helping to sustain the UK’s prominent role as the global centre for expertise and capital to the fintech industry. With 85% of fintechs recently surveyed expecting to raise money on public markets within the next three years, we envisage further growth, innovation and opportunity for the sector in 2019. That is likely to be a good thing for everyone else too.

Find out more in our FinTech Comes of Age report…