For all of the commotion about Brexit, it appears as though London’s reign over the world of FinTech may be secure — even after the U.K. officially exits the EU.
Research published last month in the Z/Yen Global Financial Centers Index (GFCI), and reported in Reuters, found that London remained the world’s top financial hub, surpassing New York City, Hong Kong and Singapore — despite market volatility and uncertainty over Brexit. Not only that, but according to the GFCI, London outscored New York City — the survey’s runner-up — by a whopping 24 points.
Now, even more research suggests that London will continue to remain the world’s top financial hub.
The latest report from Early Metrics, which assessed 1,500 FinTech companies across Europe, found that London continues to be the region’s leader, despite FinTech executives admitting that they felt “a clear challenge” because of Brexit, according to news from CNBC on Monday (Oct. 16).
“London will maintain its FinTech influence if this landscape does not change,” said Early Metrics CEO Antoine Baschiera in a statement. “Positioned as the gateway between the U.S. and the EU, the U.K. already possesses expertise in successful FinTech ventures and the capability to continue this trend, demonstrated by the $564 million invested in FinTech startups this year alone.”
Reports in CNBC cited data from Innovate Finance that pinpointed the $564 million statistic, which represents how much investors placed in U.K. FinTech startups in the first half of 2017 alone. Today, London hosts more than 44,000 professionals in the FinTech industry, according to Early Metrics.
But that doesn’t mean London will have an easy time staying at the top.
According to Early Metrics, regulatory issues are a key hurdle for the city and for the U.K. in general when it comes to fostering FinTech innovation and attracting talent. A lack of access to the EU single market, paired with the U.K.’s loss of passporting rights, are key concerns for investors and startups, researchers said.
“The U.K. is currently facing its most serious challenge so far as the FinTech hub of Europe,” said Baschiera. “Although it’s too early to draw any definitive conclusions on what impact Brexit will have, companies are already assessing the implications of fundraising, talent acquisition and talent retention. Many FinTech businesses rely on fast-developing technologies in order to maintain a competitor advantage. This requires a company to be able to move quickly and have access to the right talent across borders.”
In addition to the hurdles of Brexit, London is facing competition from up-and-coming cities, including those outside Europe. While Berlin and Zurich are key FinTech hubs, Early Metrics also identified Shanghai and Tel Aviv as rising stars. Forty-two percent of the top 100 FinTech startups shortlisted by H2 Ventures and KPMG in 2015 are based in Asia or Africa, the report noted — two regions with high concentrations of capital, consumers, talent and growth. Asian FinTech startups raised nearly $4.8 billion in 2015, Early Metrics stated in a company blog post in April.
There’s a lot at stake should London’s post as the world’s FinTech leader fall to someone else.
According to CNBC, the FinTech industry yielded about $8.8. billion for the U.K. economy last year alone — not to mention the tens of thousands of jobs the market fosters. The publication also highlighted recent analysis by KPMG and the City of London, “The Value of FinTech,” that called for U.K. policymakers to take proactive measures to protect the country’s, and the city of London’s, role in FinTech.
In short, the City of London and KPMG want the U.K. government to form policy that aims to protect London’s FinTech position.
“I hope that industry and government seriously consider these recommendations in this report, especially the possibility of a sector deal,” said Catherine McGuinness, Policy and Resources committee chairman at the City of London Corporation, a local government body that promotes policy, funding and talent for the FinTech space. “FinTech is a real asset for the U.K.’s economy, and we are a global leader in our own right,” she added.
“Many countries are now taking steps to attract and retain FinTech companies,” added KPMG global strategy group partner Paul Merrey in another statement. “A sector deal would be a major boost to the U.K.’s ability to maintain its status as a global FinTech leader.”