UK fintech remains strong, says report

Government and FCA support has led to massive growth.

Finextra and Innovate Finance collaborated on the report, titled The Future of UK Fintech: 2015-2035 – An IFGS Special Edition, highlighting the UK’s positive environment in terms of regulation, investment, consumer adoption, and talent.

The UK is now home to over 60 tech unicorns and 2500 fintech companies, with 75,000 people working in the sector.

“In 2023 alone, UK fintech attracted $5.1 billion in investment, second globally only to the US and ahead of all of the next 28 European countries combined. The UK is without a doubt a global leader in financial innovation and technology, but other countries are catching up quickly,” Janine Hirt, CEO, Innovate Finance, said.

Regulatory Sandbox

The FCA’s Project Innovate, launched in October 2014, aims to support firms in developing innovative products and services that could benefit consumers and improve market competition.

“2014 saw the UK Government, supported by City of London Corporation, launch the fintech membership body, Innovate Finance, which supports innovation and fintech growth and helps position the UK as a global leader in fintech,” Emma Kisby, EMEA CEO, Cogo, said.

“Launching this recognised body was a game changer, as it instantly gave UK fintech companies greater access to investment and offered support with international expansion, regulation and sourcing talent.”

A key component of Project Initiative is the Regulatory Sandbox, where businesses can test innovative products, services, business models, and delivery mechanisms in a live market environment while ensuring that appropriate consumer protection safeguards are in place.

In addition, industry bodies such as Innovate Finance, UK Finance, OBIE, and the Centre for Finance, Innovation and Technology (CFIT) support fintech entrepreneurs in their journeys to scale.

“A favourable regulatory environment, a highly skilled and international talent pool, and significant consumer appetite for innovation has led to the UK becoming and continuing to be the perfect breeding ground for fintech companies, many of whom have seen impressive growth over the last decade,” Clare Gambardella, Chief Customer Officer, Zopa Bank, says.

Looking ahead

Looking forward to 2035, the report says the UK could learn from Silicon Valley’s ecosystem and culture.

That means angel investors who are willing to back high risk, high reward ideas, mentors who can give start-ups guidance, and a culture which embraces failure as a learning experience for entrepreneurs.

Four central trends are identified:

  1. Transformative Technologies: Opportunities and Risks
  2. Embedded Finance and Beyond: Impacting Industries Outside Finance
  3. Sustainable Finance: Leading in the Shifting Ecosystem
  4. Gen Z Fintech Users: The Next Generation of Consumers

Keeping the next generation of users interested and engaged will be key to companies’ success. As the report says, Gen Z is not afraid to jump between accounts, moving between incumbents, fintechs, and challenger banks to get what they need.

Social media remains a popular source of unregulated advice for this cohort. Firms may need to tap into that, working with “finfluencers” to reach their target customers.