2022 saw FinTech as one of the most dominating sectors when accessing funding. And when it comes to FinTech, it is considered the Global hub for FinTech. However, the sector didn't go without its challenges; with the economic climate, even fintech suffered from lower valuations like other tech areas. The overall skills shortage also has seen some companies move slower than predicted.
Now it's 2023. What should the UK fintech industry be keeping an eye on? We look at three key things we expect to see.
While there have been record levels of investment in FinTech in the past, the developments in the UK economy are likely to mean investors will be looking at profitability as a key decision-maker when allocating funding.
Investors will be looking to move from more risky options and choose to invest in those with a clear path to profits and those which solve real problems which are needed by businesses and customers.
There was rapid growth for FinTech in 2022. While there will continue to be significant spending and development within the FinTech industry throughout 2023, it would be amiss not to acknowledge that the rise of interest rates could have contributed to a cool-off of investment.
UK economics again will see the habits of consumers change over the coming year. It will not be a surprise to assume that a focus for consumers will be things which are needed to help save or spread costs. Nice-to-haves are likely to be the first to go.
However, with this comes opportunities within the FinTech industry. With people looking to manage their costs. Those who can do so can offer financial advice, help, or ways to spread costs. FinTech businesses are a must-have to help navigate the current climate.
With that there is another consideration for FinTech in 2023 is the jump in demand for buy now pay later (BNPL) schemes to help ease the cost of living crisis. There is an expectation for regulations to be tightened that could impact some FinTech businesses. The consumer age group who use BNPL now lands within the 18-34-year-olds bracket. Surveys suggest that while this group has increased its use of BNPL over a third, they do not understand the risks and terms when agreeing to these schemes. Any regulation changes could impact some key FinTech businesses in the UK.
Businesses will likely see employers change their employment package to help their employees through the current cost of living crisis. Financial resilience needs to extend to more than just retirement. Assisting employees with savings, growth, and opportunities will not just matter to help with overall economic growth. Showing stability to employees while acknowledging and helping them through the current climate also helps retain talent and continues business development.
While there are challenges ahead for the UK and the FinTech industry, there are still reasons to be optimistic. The UK FinTech industry is still one of the fastest growing in the world and continues to have more funding. There are opportunities for businesses to help consumers and other companies navigate the current climate.