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Case Study: The British Fintech Scenescape
The success story of the fintech industry has reverberated through almost all corners of the world. Fintech has engaged the attention of the mass majority of people, businesses, and industries, resulting in stupendous growth. Of all countries participating in the magnification of fintech, a few countries have attained enough expertise and experience to be rendered, world leaders. The United Kingdom is the second biggest leader in the fintech industry.
The UK has been one of the prime fintech markets since the advent of the conglomeration of finance and technology. Because of its deep-rooted connections with fintech, the UK has had the opportunity to develop the four main segments that control and guide the prospects related to a particular industry or market within a country. These four segments are:
Availability of Talent
The talent vis-à-vis the fintech industry is available in plenty in the UK. From universities to corporate offices, fintech has percolated to the deeper levels of society that have enabled the development of a highly talented population excelling in the fintech industry.
Inflowing Investors
Because of the ideal ecosystem prevalent in the UK market, investors have found a lucrative corner where talent and ideas are abundant, ensuring that the UK remains a global leader.
Government Policies
The policies strategized and implemented by the UK government focus on the growth of the fintech industry and the level of investments that fuel its success. The UK government has propelled its stance in the fintech industry by incentivizing capital investors.
Adoption and Demand
The people living and residing in the UK have been well-acquainted with technology and related industries like fintech. Since the 2000s, the UK population has been exposed to the advantages and convenience of fintech, empowering them with first-hand knowledge of the various benefits that come with it. Such empowerment has spiked the demand and rate of adoption, making way for more innovation and novelty in fintech.
Apart from these factors, the UK government has also been focused on diminishing boundaries and creating bridges with other potential fintech-associated hubs like Hong Kong, Australia, etc. Because of its historically strong position and past European orientation, the UK has numerous virtual benefactors influencing its positioning as one of the world fintech leaders.
The Topography
Although small area wise, the UK fintech market comprises one superhub and several smaller hubs, which create an enormous conglomerate of fintech firms. The topography of the UK fintech landscape is well-balanced, with London as the superhub.
London, the Suber Hub of Fintech
The capital city of London not only has massive historical importance on the world map but is also the second highest contender on the map of fintech after Silicon Valley. London compromises almost 75% of the total number of fintech firms in the UK, with almost 94% of the country’s fintech investments flowing into the city. Fintech giants like Wise, Revolut, Checkout.com, Monzo, Starling Bank, Blockchain.com, and many more are located in this superhub and have contributed immensely to setting the scene for successful fintech. The London supremacy vis-à-vis fintech is unmatchable because of its pivotal positioning as the attraction for capital investors.
Smaller Fintech Hubs
Apart from London, the UK is also witnessing the emergence of several smaller hubs located in a distributed manner across the country because of their proximity to London and comparatively lower costs to the capital city. Manchester and Leeds have cumulatively attracted fintech startups to base their businesses. Similarly, Scotland, Birmingham, Cambridge, Newcastle, Reading, Wales, etc., are also rapidly building up their fintech ecosystems to invite and accommodate more fintech development.
The Challenges
The UK fintech market is well established and thriving. However, the fintech landscape in the UK has its own set of challenges that hamper its pace of growth.
One of the prime factors posing a challenge is the growing global competition. With the emergence of the upcoming fintech hubs like Brazil, India, etc., and the existing leaders like the USA, China, and Singapore, the UK market is feeling the pressure of dilution. Another prime factor that is disrupting the flow of fintech progress everywhere is cybersecurity. Cyber crimes and attacks are becoming increasingly prevalent with the adoption of fintech and the growing participation of users.
The dilution of talent is another key factor that poses a potential threat to the UK fintech market.
Top 10 Fintech Companies in the UK
Checkout.com – Digital payments platform provider
Revolut – Digital-only bank
Monzo – Digital-only bank
Starling Bank – Digital-only bank
Wise – Money transfers and online payments
Atom – Digital-only bank
Zopa – Personal loan provider
Blockchain.com – Cryptocurrency platform
Clearbank – Banking facilities provider
Tandem – Digital-only bank
Leading Fintech Streams in the UK
Fintech is like an enormous umbrella that has several subdivisions. Each of these subdivisions holds the potential to become individual niches, like BNPL (Buy Now, Pay Later), e-Wallets, e-Payments, digital insurance and investments, digital asset management (DAM), and many more. The UK market is predominantly a global fintech leader, implying that most of these fintech streams are prevalent in its landscape. However, the five most prominent fintech segments dominating the UK are:
Lending
The lending sector has been the most successful of all. The market has seen a remarkable rise in lenders and borrowers alike, making way for different levels and types of loan platforms that cater to a wider audience on both ends. Peer-to-peer (P2P) lending applications, like Amigo, have gained tremendous traction among fintech users. Iwoca is one of the prime players in the industry today that offers short-term loans and risk assessment services. OakNorth Bank is also a key lender actively participating in the UK economy.
WealthTech
Wealth management applications and services are increasing in importance globally. WeathTech comprises asset management, investments, assessment and risk analysis, guidance and advice, etc. WealthTech has gained immense popularity in the UK in recent years, with companies like
Challenger Banking
Digital-only banks, also called neo banks or challenger banks, have revolutionized the banking system. Challenger banks advocate the existence of 24*7 services, better control and power in the hands of their customers, and secure digital platforms that allow easy banking. Such challenger banks, like Munzo, Atom, Starling Bank, and more, have revamped the UK banking system.
RegTech
Regulations and compliances are an integral part of the financial system. The fintech industry must have strict regulations, standards, and regulatory systems that oversee the application and abidance of nationwide and international regulations. The UK market is well-established, implying that its regulatory system is more advanced than its lesser experienced counterparts. The UK has also pioneered the creation of regulatory “sandboxes” that allow new firms and technologies to float in the real market to gauge their success rates, improvement areas, and other KPIs (Key Performance Indexes). The concept of sandboxes is rapidly gaining traction in other countries as well.
InsurTech
The insurance sector has been a pain point for most consumers because of the tedious processes involved in assessing and choosing the best one. InsurTech has disrupted the market by bringing in platforms that remove these pain points and provide convenient alternatives. With the rise in the commodity market, the insurance sector has witnessed an evident spike globally. The UK market to has an advancing InsurTech segment, with companies like
The Future of Fintech in the UK
Fintech in the UK has had an incredible trajectory with giants like Munzo, Revolut, Wise, Blockchain.com, etc., in its corner. Fintech has tremendous scope for advancements with technologies like artificial intelligence, big data, cloud computing, etc., making its mark in almost all financial segments. The UK fintech market is one of the biggest markets because of the quality of services, innovative capabilities, and expertise in technology. London is the second biggest fintech hub in the world, implying that the network of fintech firms in the UK has evolved due to its ideal ecosystem offering the perfect combination of talent, capital investments, government support, etc.
