Why The UK Can’t ‘Rest On Its Laurels’ When It Comes To Advancing FinTech

Halfway through the year 2021, the European FinTech segment is very much on fire. Investors poured $5.3 billion into London-based FinTech firms in the first half of the year — more than 2.5 times the amount invested in any other European city, leading New York and trailing only San Francisco by a slight margin.

Even more remarkable, as Square U.K.’s Head of Payments Partnerships & Industry Relations Kaushalya Somasundaram told Karen Webster and CEO of Innovate Finance Janine Hirt in a recent conversation, is how much U.S. interest is captured in all of that investment — some 38 percent of the deals closed in the first half of the year had input from at least one U.S.-based investor. These, she noted, “are incredible statistics to follow in terms of the investor appetite and the vibrancy of the FinTech ecosystem in the U.K.”

Hirt agreed, noting that the vibrancy of the U.K. FinTech scene, and particularly the London FinTech scene, is unparalleled anywhere on Earth – thanks to a combination of macro factors like proactive regulation and a government that is very dedicated to ensuring that FinTech is supported in the U.K.

“But we cannot rest on our laurels if we want to ensure that the U.K. remains one of the most attractive places in the world for FinTechs to scale and grow,” said Hirt. “We’ve got to make sure that we deliver on the roadmap set out by the recently published Kalifa Review, facilitating increased access to investment, further developing our world-leading regulatory regime and incentivizing industry partnerships. The appetite is clearly there to make sure that the U.K. FinTech ecosystem maintains its position as a preeminent international hub for financial innovation.”

Recreating The Consumer Experience End To End

The power of FinTech innovation, Somasundaram noted, lies in the many ways it enhances the consumer experience across sectors — things like investing and insurance that have been historically slow to change or innovate until becoming targets for disruption in the market. Traditional financial institutions have long held an advantage, but as of 2013, we saw that change worldwide as the balance of power began to shift, and FinTechs started to intrude on what had been banks’ sole territory in terms of provisioning services to consumers.

“Consumers are now seeing how technology has made it easier to manage almost all aspects of their personal lives. And they now expect the same when it comes to managing their finances,” Somasundaram noted.

And not only manage them but also leverage technology to combine them with other activities in their increasingly connected lives. As a result, their total experience becomes more seamless, because they can manage a bunch of activities in parallel within a connected ecosystem.

As Hirt noted, that’s why there has been such an explosion in embedded finance of late.  “Going forward, if you look at new business models, many of them will come from two sectors overlapping. Consumers now expect and demand immediacy and ease of use when it comes to financial transactions and financial services.”

Putting The Customer Back In The Center

Hirt commented that more consumers reported feeling comfortable with digital banking and mobile money apps — and trusted them more — than they did before lockdown. “COVID-19 showed us how important technology is to every aspect of our lives, particularly financial services. FinTech adoption over the pandemic increased from 71 percent to 76 percent in the U.K.”

It is also a picture of collaboration — as important as disruptors are, we also need the collaborative players that are “working to partner with FinTechs, large incumbents and large institutions to truly transform financial services,” said Hirt.

Also necessary, Somasundaram noted, is “robust, reliable and predictable regulation” that will give innovators the backing they need to confidently move forward in rebuilding and recreating the consumer’s financial journey.

But, they both agreed, FinTech has come to the U.K. — and it will likely move faster going forward. “I think that’s a reflection of what we’re going to see across the entire FinTech industry,” Hirt said. “In payments, as well as in every other vertical, is about putting the customer back at the center, and making sure that financial services works for them and for all of us. It’s a democratization of the sector and a recognition of the importance of technology’s role.”