Is the FinTech market a beacon of hope for the UK economy? – Maxim Cohen, UK Adviser
Joe Roche / 13th July 2021
Last year, faced with the need to adjust to the ‘new normal’ imposed on us overnight by the pandemic, we all turned our attention to digital.
With more day-to-day activities taking place online, the demand for digital finance and financial services technology has accelerated what was already in growth, providing greater opportunity for the UK FinTech industry.
Defined by Whitecap Consulting as ‘the application of technology to improve financial products and services’, the upward trajectory of FinTech looks set to continue.
The quiet revolution we have been undergoing has resulted in the UK being widely regarded as one of the leaders in the FinTech industry, with London a key driver in the success story. The sector is attractive to investors: in 2020, 94% of the UK’s FinTech venture capital came to the city, worth over £11bn to the UK economy.
To fuel further growth, there is hope that Brexit will give the government more freedom in terms of the regulations that currently surround FinTech firms, which will encourage investors and give our post-pandemic economy a much needed boost as a result.
Not only does the UK lead the way in terms of development, we also have one of the highest rates of consumer FinTech adoption in developed economies, with 71% of UK consumers already using FinTech services.
So what is propelling this thriving sector forward, and why does it lend itself perfectly to the UK’s entrepreneurial spirit?
The UK government is banking on FinTechs
The UK government is serious about supporting FinTechs. It demonstrated this clearly by appointing Ron Kalifa OBE to review how the UK government could best support the sector. Published in February, The “Kalifa Review of UK Fintech” identifies where the opportunities lie within the sector, and sets out recommendations on how best to achieve these.
In a further show of support for the industry, the Chancellor of the Exchequer has committed to assisting innovative businesses weather the Covid-19 storm. Many of these businesses have been locked out of mainstream pandemic funding because they rely on private investment rather than revenue or profit.
In recognition of this, the Chancellor announced in his spring budget that he would be launching a successor to the successful ‘Future Fund’ scheme, with ‘Future Fund: Breakthrough’, a £375m scheme to encourage private investors to co-invest with the government in high-growth and innovative UK companies.
FinTechs bring opportunities for the UK
The Chancellor’s announcement is to be applauded, and the focus on R&D intensive companies will accelerate the deployment of breakthrough technologies. In supporting the success of UK FinTechs, Ron Kalifa states,”we must lead this technological revolution”. The sector brings all kinds of opportunities and benefits to the UK and our economy. Firstly, they bring jobs themselves.
Secondly, they help to create jobs in other industries. Like most companies, FinTechs both provide and use services, so if they are located in the UK, the chances are that they will source a high percentage of their services from the UK. What’s more, their staff (and their service providers’ staff) will probably spend most of their wages in the UK.
Thirdly, the nature of FinTech is that it improves peoples’ lives. A lot of the FinTech space is devoted to providing services that have existed for a long time, but delivering them in a more convenient way that benefits the end user. In particular, FinTechs are often both well-placed and willing to serve markets that have long been overlooked by established financial services and IT companies.
The impact that UK FinTechs are having on society extends to promoting financial inclusion and helping to equip young people with the skills they need to manage their finances. On an even greater level, FinTech solutions, applications and platforms are being developed through a convergence of Finance, Climate and Technology, that encourage users to put the climate first – Climate FinTech.
The UK is known for its entrepreneurial spirit, with a very high percentage of self-employed people and thriving independent businesses, making it a natural base for FInTechs. As part of the Kalifa Review, Deloitte produced an analysis of the FinTech landscape, which includes the statement:
“Wherever you find entrepreneurial minds, financial expertise, investment capital, technology skills, engaged regulators and proactive policymakers, you’ll find FinTech. Here in the UK, we have a fantastic combination of all these things and, as a result, we are a global leader in the future of financial services.”
Balancing technology and human experience
Although technology makes financial transactions more efficient – whether that be a new mortgage,online banking or making investments – there is often still a need to connect with the company behind the platform.
Maintaining a balance between technology and human interaction is vital, and FInTech should aim to empower the end user, rather than seek to eliminate all human contact. Technology can improve a process or experience, but does not deliver the human empathy that people want when making financial decisions.
The future is bright for FinTechs; by increasing business efficiency through improvements and automation, we can help businesses grow faster and create a better experience for our customers.
Maxim Cohen, Chief Executive, UK Adviser