The traditional London-based suited and booted banker may soon be squeezed out by Shoreditch hipsters. As the fintech revolution gains traction around the world, the UK is firmly established as a leading player.
As a peerless financial powerhouse, London is the dominant fintech centre in Europe, playing host to high profile unicorns such as challenger bank Monzo, small and medium business lender OakNorth and international money transfer company Transferwise.
Momentum behind the sector in the capital has been fuelled by tax break incentives, regulatory support, and world class education, together with a consumer appetite for mobile finance tools that let you trade, bank and process invoices from your smartphone.
“The UK has the best of both native and foreign STEAM (Science, Technology, Engineering, Arts and Mathematics) fintech talent in the world and a thriving fintech ecosystem,” says Lawrence Wintermeyer, co-founder of digital finance specialist, Elipses.
“In fact, our global financial services hub is so dominant we need to be more confident about our global skills, reach and investment; you have to wonder why we have not created a global fintech like Alipay or Stripe.”
Wintermeyer is hardly alone in asking such questions. While the UK has outperformed Europe in terms of venture capital fintech investment, rumblings that the industry could be doing even better are gathering pace amongst commentators and industry insiders, who say faster growth and greater international ambition are critical amid Brexit uncertainty and rising competition from Germany and France.
For Steve Ellis, fintech business advisor and founder of Metia Group, the UK has form when it comes to creating innovative finance products that just miss out on becoming a truly world-beating proposition. His prescription? To ape the more aggressive expansion instincts of California’s tech scene.
“There’s a well cultivated playbook for growth that is schooled into every Silicon Valley start-up and it is to scale massively,” he says. “Emerging businesses need access to bigger, deeper pockets for funding, and to apply a very un-British level of unfettered ambition.
“It’s not a natural fit to our personality, but hopefully this new generation of fintech entrepreneurs will take to it and we’ll see global players emerge.”
Such an expansion mindset will demand heavy investment in a talent pool that could be squeezed by Brexit, along with a razor-sharp focus on innovation. Accelerator programmes such as Accenture’s Fintech Innovation Lab in which established providers mentor start-ups as well as partnerships between fintechs, schools and universities are considered key routes to nurture talent to develop the game changing products that can transform payment landscape.
“Potential and longevity aren’t measured in funding rounds. What marks out true disruptors is their passion and desire to build businesses that solve problems in new exciting ways,” says Dan Cobley, Fintech Partner at venture builder Blenheim Chalcot.
“It’s important that it isn’t just about the same solutions but with nicer interfaces and better-looking apps. If UK fintech is going to maintain and further its position on the world stage, then we need to increase our focus on solving genuine problems, such as helping small businesses which face hurdle after hurdle as they scale and alleviating the very real burden that is debt stress.”
While challenger banks such as Monzo and Revolut are on the rise, there is still plenty of work for fintechs to do in order to really make a dent in the market share of their more traditional competitors.
A study by mobile analytics firm, Ogury, laid bare the modest market penetration with the 10 most widely used banking apps in the UK belonging to traditional high street banks rather than challengers.
“Is your average man or women on the street even aware of fintech?” questions Dan Kiernan of Henley Business School, which is launching a Master’s degree course in the subject this year.
“What benefits has it brought them so far? Is making an insurance claim, securing a mortgage or managing your savings getting easier? Perhaps it is but we are hardly at Amazon-like levels of customer service yet. Even the early adopters of services like app-only banks are only using them in addition to the incumbent high street banks.”
His sentiments are echoed by Mike Teasdale, Founder of Harvest Digital, a digital marketing agency who describes the sale of products to a market that doesn’t understand them as a ‘gargantum task.’
For Mr Teasdale, a greater engagement with the advertising market may boost awareness of the UK fintech sector and enhance its standing internationally.
“The thin line between life and death – success and failure – is the number of users these businesses can get on board,” he says. “If the UK fintech scene harnesses the UK’s third biggest export – advertising – this could also mean the difference between being a hub of innovation or a world leader that might just make good on its promise.”