Record-breaking Moments: Why is Fintech in the UK so exciting at the moment?

The past few weeks have seen some big news stories for UK Fintech.

First, research showed that 2021 has already brought in more investment into European fintech companies than the whole of 2019 — €10.4bn in the first six months of 2021 compared to €9.3bn in 2019, the last record-breaking year. Of this huge figure, UK contributed 41 percent of 2021’s investment raised, showing the enduring attractiveness of the UK as a destination for foreign investment, especially in its flagship Fintech industry.

Moreover, the UK now officially has 100 tech unicorns (companies valued $1bn or more) since the latest fundraise by AI start-up, Tractable. 34 percent of UK tech unicorns are classified as fintech companies, 13 of which reached unicorn status this year, a 127% increase since 2017.

Are these records only impressive given the crash of 2020? Or is something in the water accelerating the growth of UK Fintech? We believe it is the latter and here’s why:

Investors

While the UK’s current amount raised for 2021 (€4.3bn) is lower than 2019 (€4.9bn), we are only halfway through the year and there has been increased interest from international investors looking to invest in the UK and Europe.

Venture capital investor companies such as Augmentum and Draper Esprit are looking to raise further capital to invest in fintech, hoping to capitalise on the high level of interest in the region. With the promise of further opportunities for investment, and strong governmental support, the right financial resources are present in the UK to see new startups and products continue to emerge.

Regulators

The financial industry in the UK has always shown strong initiative in regulating activity and this regulatory structure has influenced other regulatory practices on a worldwide basis. The FCA regulates almost 60,000 firms and is dialled-in to initiatives to drive innovation in financial services, including Open Finance and the use of APIs in finance. It engages with fintechs and has demonstrated a desire to encourage sector development through initiatives such as the FCA Innovation Hub and Regulatory Sandbox and involvement in the Global Financial Innovation Network (GFIN). Regulatory support is not new in the UK, but the FCA has continued to foster innovation and support the growth of fintech, which in turn leads to high interest from investors and financial institutions.

Innovative Products and Services

The UK market has shown it is very receptive to innovative ideas. More people are engaged with and taking control of their finances than ever before, and new start-ups can quickly gain a large userbase and investment with products that address pain points. Fintech and consumers are co-dependent on one another — innovative new products help consumers, leading to strong consumer engagement, which breeds more innovation. With record-breaking investment for this year, fintechs have the opportunity to see a vision through to reality and continue to develop the industry.

Collaboration

Recent trends have shown an increased interest in collaboration among UK Fintech and financial institutions. New partnerships are announced daily and many fintech companies are business-facing, rather than consumer-facing. This has led to increased partnerships between Fintech companies and banks, encouraged by both Fintech’s maturity and improvements in banks’ trust and willingness to utilise other services. This marks a shift in attitude within the UK financial services industry and will continue to foster an environment of collaboration and support.

These are just a few of the reasons UK Fintech is so exciting right now. The proof is in the pudding — 2021 is already a record-breaking year and this is only the beginning!

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