FinTech is a new tech seeking to improve or automate the delivery or use of financial services. When people think of FinTech, they may immediately think of PayPal or Banking Apps; however, there is much more going on in FinTech than it may seem on the surface and in the UK. With over 2,500 fintech companies within the UK, the trends show the strength of the current FinTech industry and the predicted growth.
Here we have a look at why signs point to the continued rise of fintech in the UK.
1. London is the second highest-ranking FinTech ecosystem globally
London has been key to the success of the UK FinTech industry. It has the world’s highest concentration of financial and professional services, and in 2020 FinTech businesses within London gained 94% of the venture capital spent on FinTech across the UK.
London acts as the Super Hub for FinTech in the UK. London is not just because of its position within the financial district but London houses over two-thirds of all UK FinTech businesses.
While this is an incredible headline, it does tend to mean the activity happening within the rest of the UK gets overlooked.
There has been significant growth in multiple hubs outside of London. There have been 25 hubs identified across the UK for FinTech, with 10 showing considerable growth. These ten areas have the potential for the development and develop FinTech economies locally.
2. FinTech is a vehicle for growth – 16% vs 1.3% compared to other SMEs.
FinTech companies experience a much higher growth rate than SMEs. Over the past ten years, the annual growth rate has been 16% within FinTech compared to annual growth of 1.3% across SMEs.
While the annualised growth over ten years averages 16%, there was also accelerated growth across 2011- 2016, which grew by 21% year on year. While it may seem that this trend has slowed down in recent years, there is still considerable activity within the UK, and with the number of hubs becoming more established, there will continue to see the market expand.
3. FinTech could create more than 50,000 jobs over the next three years.
There are already around 74,000 people who work within FinTech. The expectation for the industry to require an additional 64% workforce shows significant growth expectations within established FinTech businesses and start-ups over the next three years.
The confirmation of growth can also be seen through the GVA (Gross Value Add) predictions for the industry, contributing an uplift of £2.4 – 3bn over the next three years.
Creating Sustainable Growth.
While this demonstrates significant growth, the investment levels for FinTech in the UK remain high; for some FinTech companies, their valuations from investors may not be hit due to the difficulties the industry has experienced expanding.
Being able to gain the skills for the growth and expansion needed to reach the expectation of investment valuations means the FinTech community need to consider their skills requirements and growth plans early in the start-up process to stay on their predicted trajectory.
The tech industry in the UK already has the most open roles available. Tech has double the number of open positions, with 5,000 being FinTech-specific roles. Collaborating with other businesses helps some of this initial issue. Still, with the expected growth, FinTech companies need to plan their skills and talent needs to achieve their growth potential.