All eyes on UK: What the world can learn from UK fintech

Brid-Aine Parnell

Friday 22 April 2016

Britain is the global fintech capital, and while its organisations are flourishing thanks to funding for early-stage firms and a supportive regulatory regime, there’s always room for improvement.

In August 2014, Chancellor George Osborne announced the UK government’s intention to make the UK the “global capital of fintech”. According to a recently released Treasury-commissioned study, so far, they’re succeeding. The recent EY report UK FinTech: On the cutting edge says Britain is the world’s leading financial technology centre, but it still has work to do to cement this position.

The report compares leading fintech hubs – New York, California, Hong Kong, Germany, Australia, Singapore and the UK – across four categories: access to talent; regulatory environment; availability of capital for startups and scale-ups; and end-client demand.

Britain on top

EY estimates that the UK’s fintech industry turned over £6.6bn in 2015 and was employing 61,000 people, which equates to approximately five per cent of the financial services (FS) workforce.

“More people work in UK fintech than in New York fintech, or in the combined fintech workforce of Singapore, Hong Kong and Australia. The UK has always benefitted from a large FS industry. However, much of the recent success of the UK’s fintech sector should be attributed to a well-served and well-functioning ecosystem,” the report says.

Although California had the most capital available for fintech investment, the UK also offers funds for early-stage firms, generating around £524m of investment in 2015. London’s position as a global financial capital also ensured strong demand for financial technologies in the country.

But Britain stood out for having the strongest fintech policy environment, with a supportive regulatory regime.

“The strength of the UK policy environment is due to the supportiveness and accessibility of the Financial Conduct Authority (FCA), effective tax incentives and numerous government programmes designed to promote competition and innovation which indirectly support fintechs,” the report says.

Overall, the UK fintech ecosystem ranked highest when considering all four categories in the report. California, New York and Singapore followed, before Germany, then Australia and finally Hong Kong.

Staying on top

However, the UK leads by a narrow margin, and there is more that can be done to keep Britain’s fintech sector flourishing.

EY recommends that government initiatives like mandatory referrals from banks to alternative finance providers for SMEs be accelerated out of the consultation phase. The report also suggests building on the FCA’s globally progressive position, particularly its innovation section, and giving fintech startups practical business support.

The UK also needs to strengthen its tech talent pipeline, improve access to growth capital, and encourage demand by promoting government, consumer and financial industry adoption of fintech solutions.

Britain has had a head start in fintech with London leading the way, but other regions are starting to catch up. The UK government needs to keep its focus on the sector if it wants to stay on top.

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