The unstoppable growth of UK Fintech

Chris Lewis Head of DevOps, FundsLibrary

At London Tech Week there was plenty of buzz surrounding the staggering levels of growth and investment within the Financial Technology (“fintech”) sector in the UK. We spoke to our Head of DevOps, Chris Lewis, to hear his thoughts on this trend.

What would you class as fintech?

The term is so broad these days it’s meaning is becoming diluted; there are many organisations who now identify them as fintech.  Broadly speaking when you consider what the company is trying to do, you can divide them into two types: 

  • Those using tech to disrupt a part of the existing supply chain (for example using AI to reduce fraud for established finance companies)
  • Those trying to reinvent the finance paradigm itself (such as P2P lending)

Another way, using Marc Andreessen, developer of Mosiac and founder of Netscape for inspiration, is to simply look at the ethos of their business strategy for using technology to disrupt the existing status quo, giving superior client propositions with relatively small business operations.  The UK challenger banks are a great example of this. 

What is the scale of investment?

It’s truly staggering.  Overall the UK is now home to 72 Tech “unicorns” (firms that are valued at over $1bn), a number which falls behind only China and the US.  A quarter of these firms are classed as fintech, including online banks such as Monzo, Revolut and Starling Bank1.  Unicorns aside, the annual Tech nation report released last month2 shows huge levels of investment going into fintech overall, with investment into the space nearly twice the amount that its nearest tech competitor, e-commerce, is currently receiving.

Where is this increased investment coming from? 

Clearly there’s a wider context here and it’s all about economies digitising – more specifically through the advent of software.  Eight years ago Mark Andreessen penned a now famous essay in the WSJ entitled “Software is Eating the World”3 in which he made the premise that “every company needs to become a software company” or face the prospect of disruption.  For me this is a key message, no matter your industry, as has been borne out with Taxi firms and the rise of Uber, or Hotels and the rise of Airbnb. Ultimately, you will always be competing against software companies who will constantly try to challenge you. 

Why has the UK been so successful in attracting these investments?

Taavet Hinrikus, who co-founded a fintech success story TransferWise, a billion dollar money transfer platform, says it is down to three factors:  a liberal attitude of government towards innovation and entrepreneurship; a liberal regulatory approach (the FCA in 2013 received a statutory objective of promoting competition and Hinkrikus hails it as “the most innovative regulator in the world”); and the benefits of European integration with the introduction of schemes, for example passporting.

Software isn’t new, why now?

We’ve seen a culmination of technological innovations within a variety of different fields that now make modern computer processing and storage power relatively cheap.  This is exemplified by the cloud and the ubiquity of connected devices for consumers.  Not only does this lower the barrier to entry for doing what historically would have taken a huge amount of investment in tech and marketing, but it also throws the doors wide open to small scale innovators and their ability to create big successful firms at a rapid pace.  It’s an exciting time indeed, not just for those of us lucky enough to work within the tech field but for society itself.  Ben Evans of Andreessen Horowitz has a useful way of thinking about technological phases which he calls cycles. This would suggest we are about to see another massive leap forward with AI and machine learning, which is currently a focus of frenetic activity within the field of start-ups and investment4

How do we invest in Technology at FundsLibrary?

We all know technology doesn’t stand still, there are advances happening all the time. We commit over 10,000 days a year to support our R&D. We are committed to leveraging new technologies in the delivery of highly scalable and resilient services which we can iterate on at pace, allowing us to exceed expectations and meet the demands of today’s and tomorrow’s clients. 

For me, no matter how good the tech is, it all boils down to a commitment to client service.  Jeff Bezos used the phrase “customer obsessed” and there’s a lot to be said about products standing or falling depending on whether they have a real market fit.  I think that whilst technology is constantly driving down the barrier to entry for entering fields like finance, the modern consumer’s expectations are being continually raised: it’s no longer good enough to satisfy a client, you must delight them. One of our core business values is client collaboration. We work in partnership with our clients, sharing our expertise to increase their competitiveness.

If you would like to know more about our digital, data and regulatory solution, and how we may be able to support your business, please email us or call us on +44 117 980 9994.

1 https://www.telegraph.co.uk/technology/2019/06/10/london-tech-week-third-europes-fastest-growing-tech-companies/

2 https://technation.io/report2019/

3 https://www.wsj.com/articles/SB10001424053111903480904576512250915629460

4 https://www.ben-evans.com/benedictevans/2017/11/29/presentation-ten-year-futures

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All figures correct as at 30.06.2019.