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Why Is the UK a Dominant Fintech Hub?
December 9, 2022
The UK has grown into one of the world’s leading fintech hubs. A Deloitte study conducted in 2022 shows that the UK has a thriving ecosystem of approximately 2,500 fintech companies. Most of them are in London, so today, London ranks second in terms of the number of fintech companies. Coinciding with the strong influence of the UK on the fintech sector, the study showed that one in three companies sees an expansion in the market as one of their main goals.
The UK is a favourable place for technology-related business. This is reflected in the regulatory framework, personnel reserves, investor-friendly policies, and tax benefits, as well as in the sizable consumer market. Large amounts of funding, mentoring, and business connections have allowed startups to grow, unlock their potential and achieve significant success even in the early stages. Learn more about the fintech market in the UK with Payrow.
The UK Financial Technology Market in Figures
The UK is at the forefront of financial services thanks to a system of startups, incumbents, consumers, and regulators who all embrace innovation. We are likely to witness even more intensive development of the online financial technology market because the key to the continued success factors like specialisation, talent and openness are all present in the UK. This becomes clear from the statistics: according to Global City, there are about 90,000 financial and insurance firms in the UK, while London has one of the highest concentrations of such firms in the world. Out of 43 unicorns in the UK, 21 are fintech. These are well-known brands, such as Revolut, OakNorth Bank, Checkout.com, and Starling Bank.
Foreign currency transactions and exchange trades worth $3.6 trillion are made in London every day, indicating the internationality of the UK financial market. This figure is higher than the New York, Singapore, Tokyo, and Hong Kong markets combined. One core factor has traditionally been the location of the UK, which is advantageous due to the time zone that crosses major markets. But, in the tech world, where location is often less important, London nevertheless maintains a leading position.
The British fintech system covers 23 sub-segments, where the main place is occupied by healthcare technologies (WealthTech) and payments, which account for more than half of British fintech companies. The companies listed in London deal with payments, asset management, digital banking, crypto and much more besides.
According to the UK Government’s ‘Fintech State of Nation’ report, in 2019, there were 1,600 fintech companies. The fact that this number has already grown to 2,500 is a good indicator: Britain is striving to realise the goal of doubling the number of fintech companies by 2030.
UK Fintech Investment
The high level of investment in the industry is the driving force behind the fintech system. According to Innovate Finance, UK investments reached $11.6 billion in 2021, second only to the United States and accounting for almost half of all investments in Europe.
In addition, a study by the City of London Corporation showed that fintech firms had become the main source of foreign direct investment in financial services in the UK, accounting for ⅓ of all investment projects. This evidently demonstrates the attractiveness of the UK as the world’s leading centre of innovation in financial services.
London holds first place in attracting foreign investment in financial services, gaining £600 million in 2021 for 114 projects. In 2021, more than 6,000 deals were concluded worldwide, and more than 700 of them were made in the UK, which is about 10% of the total. What’s more, Innovate Finance has revealed a tendency to increase the volume of these deals. In 2021, 31 of the around 700 deals gained the “mega” status: deals worth more than $100 million, the majority of which amounted to more than $200 million.
UK Fintech Adoption
An important role in the strength and development of the UK fintech industry is played not only by investment and domestic economic policy but also by the openness of consumers and freedom in the market. Almost everyone in the country, from ordinary office workers to major politicians and officials, is open to digitalisation and the introduction of new technologies and financial management.
The UK can be proud of one of the highest rates of fintech adoption among the consumer base in the world, which is 71% compared to the global average of 64%. You can also read more about reasons to invest in fintech in our blog.
Moreover, a UK Government study conducted in 2019 showed that 56% of traditional financial institutions put disruption at the centre of their strategy. The commitment to this was underlined by 82% of employees expecting the expansion of partnerships in the field of fintech in the next three to five years. Such partnerships aim at developing a supportive ecosystem recognised internationally as a centre of excellence in fintech.
The Role of UK Governmental Officials in Fintech Adoption
It is critically important that the politicians have also adhered to the same position because they helped to promote many active initiatives aimed at supporting and developing the fintech ecosystem of the UK. A striking example is the initiatives of the FCA to create a “sandbox”.
A Regulatory Sandbox was launched in 2016. It allows various enterprises, both authorised and unauthorised firms, including fintech companies, to test innovative products and services in a controlled environment with real customers, along with the experience of regulatory authorities. The success is evident, as 92% of firms that used the Regulatory Sandbox have successfully passed authorisation, and 80% of these are still operating.
In addition, the UK’s technical workforce is strong in both numbers and skills, which is an important factor driving the development of financial technology and innovation. In London, employers can choose from 350,000 software developers, which is more than in any other city in Europe. Current programmes designed to attract talent to the UK, for example, the Tech Nation Visa scheme, also strengthen the UK workforce.
Designated by the Home Office, Tech Nation can approve applications for a Global Talent Visa, allowing people from all over the world to work in the UK digital technology sector. The targeted approach of agencies, such as London & Partners, to this fast-growing area also has a significant impact on adoption.
Tech Nation & Fintech Adoption
There are also many high-quality initiatives and full-fledged programmes created to boost the growth of fintech and support technology companies in the UK. For example, the programmes of Tech Nation, which is a network built for British fintech and insurance technology (InsurTech) companies that are ready to expand. The initiative offers insight sessions and networking designed to provide participants with the tools and knowledge they need to scale. PrimaryBid, with whom the London Stock Exchange has been cooperating since 2019 to support retail access to the placement of shares, is among the alumni of this programme.
Tech Nation has taken another step forward by organising, with the support of His Majesty’s Treasury, a fintech Delivery Panel, which is a financial services commission. One of the group’s initiatives is the fintech Pledge, which sets the world’s leading standards for establishing partnerships between the largest financial institutions in the UK, which can become signatories, and fintech firms. This initiative is the first of its kind in the world and aims to make the UK the main place for the creation and expansion of a technology firm in the financial services sector.
Payrow Services for Your Fintech Startup
Payrow is a contemporary British fintech startup launched in London, United Kingdom. Our company specialises in providing businesses with services and innovative solutions that will allow new startups, small and middle-sized companies, and online firms to implement financial products. We aim to give our customers access to a reliable PSP financial system.
We want to raise fintech adoption through the implementation of the latest technologies that make finance more accessible. You can significantly upgrade your business strategy, reduce costs, and automate routine processes. If you want to free up your time and focus on ambitious goals, Payrow services are just for you. We offer professional customer support at every stage of the business cycle. Start your business with Payrow.
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