The UK fintech industry has been a forerunner of financial services revolution and has become a hub for new firms looking to take a different approach to the age-old model operated by big banks and financial institutions. But why has UK fintech been successful and can it keep up the momentum? “You have to, to serve these markets, reimagine how money can be managed and moved because there’s going to be more change in the next five years in financial services than what has happened in the past 30,” said PayPal chief executive, Dan Schulman in a statement.
Financial services form the backbone of global economy. They facilitate billions of payments sent around the world every day, and provide the vital capital needed for economies to grow. Moreover, they manage the increasingly complicated assets and supply reliable insurance. These are just some of the crucial services that the industry provides and the international nature of the market has meant financial services has long been dominated by big traditional banks and financial institutions which over centuries have reputed themselves as money managers of the world. Owing to the rapidly developing technology with the sector on its head and financial services, new entrants try their hand at taking a different approach to how financial services work and offer us all a much-needed alternative to the long-standing monopolies.
Depending on what stance you take, fintech represents the biggest opportunity or threat to the global financial service market. With new rivals entering apace, incumbents have been trying to snap them up to get ahead in the digital game and data shows fintech has become invaluable. A report by PwC last year showed eight out of ten financial service firms felt vulnerable to the rise of Fintech. The same number of firms also intended to strike partnerships and other deals over the next three-to-five years to help mitigate the threat.
Furthermore, Fintech represents the natural course of development for financial services. Major investment in fintech has surpassed traditional hubs like US, UK, China and India, including other nations such as France, South Korea and Japan. All of which are seeing an uptick in fintech deals. London has long been a financial hub of the world but the expansion and divergence of its banking industry has allowed the UK to take a leading position through Fintech. There are almost three times as many UK banking and payments companies now than there were in 2005 while the rest of the world has seen their fall by around one-fifth on average. UK Chancellor Philip Hammond has previously described Fintech as the country’s key to the ‘fourth industrial revolution’.