Across the UK, fintech has been growing at an exponential rate throughout the last decade. As of 2022, the UK owns more than 10% of global market share. In 2020, there were more than 2,500 fintech companies operating in the UK and that figure has continued to grow since then. While investment in the global fintech landscape is now slowing, in the first half of 2022 the UK saw a 24% increase year-on-year in fintech investments, defying the global trend.
London is responsible for much of this growth. The capital has one of the largest concentration of fintech companies in the world, coming second only to San Francisco. In fact, half of the top ten European fintech deals took place in London in 2021.
The foundations for UK fintech success
Much of the UK’s growth has been supported by natural advantages, such as a large financial services sector, access to capital, a highly skilled workforce and a progressive regulatory system.
The sector is now comprised of many different and evolving niches, including neobanking, regtech, insurtech, wealthtech, P2P finance, payments, accounting and cashflow management. Each of these niches is attracting large amounts of investment capital with many public and private bodies providing support to the UK fintech sector. The Fintech Growth Fund (FGF) is a prime example. Independent from the government, the fund is raising capital from institutional investor to pump money into UK fintechs beyond the Series B stage.
Investment still growing
Venture Capital (VC) funding into UK fintechs has exploded since 2013. At 39%, one-third of all European VC funding now goes to London alone. And while London has the best talent pool, there is a rebalancing happening in regional tech hubs such as Manchester, Birmingham and Leeds.
In total, UK-based fintech firms received $9.1bn in investments across 294 deals in the first half of 2021. 2021 was also notable for record funding in Blockchain and crypto, as well as the closely related cybersecurity and wealthtech sectors. According to KPMG, Blockchain and crypto fintechs received $30.2bn
Neobanking is expected to show revenue growth of 29.9% in 2024, while total transaction value in the sector is projected to hit US$834.5bn in 2023.
Changes to the Financial Services Act
The UK’s regulatory environment continues to be at the forefront of innovation. The UK’s Financial Conduct Authority (FCA) was responsible for founding the Global Financial Innovation Network (GFIN) – an international network of over 50 regulators and related organisations to help companies navigate between countries with new products and ideas.
Right now, companies in the sector need to be aware of changes to the Financial Services Act in 2021, as this will significantly impact the regulation of financial services in the UK, as the changes work through into FCA and PRA (Prudential Regulation Authority) rules. The act is the first real move towards unwinding UK financial services rules from EU directives and designating how firms can operate in the UK. JPP Law can provide advice to ensure you comply with these and other changes to the regulatory environment.
The outlook is bright
Fintech is also set to become a UK export success story, driving more opportunities. Driven by innovation, the sector is continuing to strengthen connections around the world with partnerships in place with Australia, Hong Kong, Singapore, China and South Korea. With the global fintech economy forecast to grow to £380bn by 2030, from £110bn in 2019, clearly, there is a lot of support in the fintech sector for companies looking for funding, or even opportunities to invest. However, doing that well means getting the right advice.
You can find that at JPP Law. Our Finance and Fintech lawyers have the the knowledge and experience of the sector you need to make the most of the opportunities out there with a range of legal specialists to support your business, including financial regulation, data protection and business funding.
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