The power of fintech is transforming our daily lives. Simply put, it is the application of new technologies to the world of finance.
These technological and regulatory changes are democratising finance and fundamentally changing the way financial services firms operate. It is using tech to put choice in the hands of individuals and businesses and changing their relationship with lenders.
2018 is the year new rules like Open Banking will enable entrepreneurs and companies to deploy and integrate technological innovations within heavily regulated payments systems. This will allow more efficient and resilient wholesale and customer cross-border commercial initiatives.
Today, the fintech sector contributes £6.6bn each year to the UK economy and employs over 60,000 people across 1,600 companies.
But in order for these innovative businesses to thrive, they need a supportive funding and regulatory environment. The UK offers both. Long a finance powerhouse, in recent years the UK has developed into an international fintech centre too.
This was confirmed last week when London Stock Exchange Group together with TheCityUK, the UK financial services industry body, launched a new global independent fintech survey, Finance for Fintech. Carried out by YouGov, it surveyed over 400 private and public companies fintech companies from Australia, Germany, Hong Kong, Israel, Singapore, Turkey, UK and the US.
The report highlights the scale, ambitions and barriers to international growth facing these businesses.
What was made clear is that fintech, by its very nature is cross-border, and the UK’s leading position as a global financial centre makes it a natural home for fintech. The City caters for businesses at every stage of development, offering the richest possible environment in which to start, test, grow and finance a tech business, as it grows domestically and cross-border.
It is a ringing endorsement that UK-based fintechs see the process of raising money through the public markets as more straightforward compared to their overseas peers. And UK-based companies expect 88 per cent growth over the next three years, higher than the average of the eight countries surveyed at 80 per cent.
London Stock Exchange’s core purpose is to facilitate access to patient or long-term capital for these businesses. Whether it is the Main Market, our international growth market, AIM, or the Order Book for Retail Bonds (ORB), we offer ambitious companies access to a globally minded range of investors with the capital and desire to match their ambition.
What’s more, long-term capital providers are increasingly supporting each other across the equity funding ladder, from angel finance to venture capital and crowdfunding through to the public markets. Capital should flow seamlessly from investor to entrepreneur.
On financing priorities, the report highlights that 85 per cent of companies are very or reasonably likely to raise funds on the public markets within the next three years. And the UK is identified as one of the top three financial centres for raising capital, as well as one of the top three markets for fintech firms looking to expand, positioned well with the US and China.
Only a few weeks ago, the UK’s first B2B platform company, IntegraFin, listed on London’s Main Market. It was one of three fintech IPOs in a single month. The firm, which originally joined our international business support and capital raising programme, ELITE, in 2015, has seen its market capitalisation rise rapidly since IPO, with a valuation to date at over $1.2bn.
ELITE is another example of the group’s commitment to championing dynamic fintechs. The programme introduces company leaders to business school resources and gives them access to a community of like minded entrepreneurs, leading advisers and investors to help facilitate their growth.
Just last week, social trading and investment platform and ELITE company, eToro, raised $100m supported by ELITE’s private placement platform, ELITE Club Deal. eToro’s CEO, Yoni Assia, talks about the company’s expansion plans in the report.
On regulation, what the survey identifies is that while regulation is starting to reflect cross border features in its design, it remains a barrier to growth for many of these firms. Here the UK is playing a leading role in reshaping the global financial regulatory landscape. This includes the UK financial regulator’s (the Financial Conduct Authority), ambitions to create a global “sandbox” programme.
This would allow firms to conduct product tests simultaneously from London into different jurisdictions, giving them a "safe space" to test their innovations ahead of launching into new markets. It is another example, post Brexit, where enhanced global regulation is most conducive to growth.
Fintechs are generating global interest, their technology is changing the world and their commercial models are financing of the future. From consolidating bank accounts on mobile phones, to realising bold visions of smart cities where products and services among the internet of things require real-time micropayments.
Fintech is allowing finance to become increasingly open and accessible to everyone. And the UK, through our leading combination of proactive regulatory environment and deep liquid pools of global capital, is today’s modern gateway for global fintech.