Why Fintech Startups Are Rushing to the United Kingdom

While the UK startup scene has grown considerably in recent years, one sector in particular has flourished: Fintech.

Few countries can boast of having had such success in the field of fintech. Indeed, the UK is home to Monzo, Revolut, Starling and Funding Circle, to name just a few. Over the past decade, Fintech innovation has found a natural home in the UK, leveraging the UK’s robust financial services sector. Over the past six years, 30% of total UK venture capital investment has gone into Fintech – more than $40 billion in total. The sector currently accounts for a third of UK unicorns .

Based on this observation, a new generation of international fintech startups see the United Kingdom as the ideal country to launch or develop. Let’s take a look at why the UK has become such a popular destination for financial innovation.

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The presence of solid financial foundations in the UK

The UK’s pre-eminence in financial services is nothing new: the country is home to some of the world’s oldest financial institutions. It has become a center recognized throughout the world in terms of wealth management, asset management, financial regulation and even insurance.

London is an internationally renowned financial services center. The capital is the epicenter of innovation in this sector, and home to the “Big Four”, the four main global investment banks and hedge funds. It is therefore logical that it is the favorite destination for Fintech start-ups. In terms of the number of fintech startups established there, London is first in Europe.

Opportunities in the financial sector are also present throughout the United Kingdom: in total, a third of British fintech companies are located outside of London

Manchester benefits from an excellent lending network and is interested in Regtech (“regulatory technology”) and payment technologies. The wealthtech and asset management sector is strong in Edinburgh, boosted by the presence of financial services giants such as Abrdn, Natwest Group and Rathbones, who have set up their offices in Scotland. Also of note is Cardiff, Wales, home to insurance giant Admiral Group. The city has carved out a strong place for itself in this sector, and investment in Welsh fintech companies has increased by 300% since 2022 .

This rich financial services environment has considerable appeal for fintech companies, which often rely on existing financial institutions to build part of their customer base, or to form partnerships and open new avenues in a constantly evolving sector.

It was this dual opportunity of tapping into and scaling the UK’s large asset management sector that inspired Sam Duncan to launch his Net Purpose business in the UK. This helps asset managers evaluate and analyze their sustainable investments, using a complex platform collecting the data that allows them to make informed decisions and accelerate investments in environmental projects.

When faced with a choice between California’s long-established tech scene and emerging fintech opportunities in the UK, Sam Duncan opted for the latter option, attracted by the UK’s reputation for sustainable investing.

“The UK is at the heart of responsible investment. It is one of the most advanced countries in terms of thinking, attitude and development of this ecosystem,” explains Sam Duncan. “In addition, we are developing a capital markets business, and London is one of the largest financial centers in the world. »

In 2022, £5.4 billion was invested in sustainable funds, in a £8.8 billion asset management sector in the UK. This demonstrates not only the interest in sustainable investment present in the country, but also the development potential surrounding this opportunity. This phenomenon is certainly fueled by the Sustainable Disclosure Requirements (SDR), the United Kingdom’s “anti-greenwashing regulations”, which aim to strengthen the rules relating to sustainability requirements for sustainable products and investments.

It was also the maturity of the UK market – this time, in terms of trading and investing – that attracted Shares founder Benjamin Chemla. Its platform combines trading and investing with social media, and allows users to follow their contacts and influencers as they make investment decisions. To launch this community, Shares needed to target a market more inclined to high-risk investments.

“Culturally, the British are less risk averse. I don’t think we would have experienced such rapid progress in another country,” explains Benjamin Chemla.

Access to institutional capital and talent

One of the major advantages of having an established financial services sector is the volume of institutional investment that innovative startups receive.

Barclays Eagle Labs and Natwest Entrepreneur Accelerator are two examples of investment support programs implemented in recent years by historic financial institutions. Insurance giant Aviva is another company investing in innovation, through its venture capital firm Aviva Ventures, but also through its fintech partnership with the UK-based Founders Factory accelerator.

The country also hosts one of the most comprehensive venture capital networks for fintech companies. Seedcamp, Anthemis and Octopus Ventures are just some of the hundreds of venture capital firms supporting UK fintech companies. Net Purpose benefited directly, when ETF Partners, a London-based player, led its £10 million Series A in 2022.

Fintech companies also benefit from the rich pool of talent flowing into the UK, from graduates trained in traditional finance to industry experts tempted by the idea of ​​starting their own business.

For Benjamin Chemla, this access to quality talent is one of the United Kingdom’s assets. His team, which he trained in the United Kingdom, is led by the former head of the trading platform of the online bank Revolut. “This country has historically had a very good record of creating fintech products for consumers,” he explained.

UK government support for the future of Fintech

The 2015 Open Banking regulations – the framework which aimed to make the UK a world leader in this area – are just one example of how public sector initiatives can contribute to innovation and expansion of Fintech.

The UK government has continued to put in place multiple programs to stimulate innovation, whether by entering into Fintech tie-up agreements with partner countries, or putting in place a number of “sandbox” regulations for help startups test their products. Also worth mentioning is the recent creation of the Unicorn Council , an independent body made up of Fintech leaders (including the CEOs of Zilch, ClearScore, Quantexa and Monzo) and led by Innovate Finance, which aims to advise the government on major decisions .

At Net Purpose, Sam Duncan has been overwhelmed by the support he has received from the public sector. He cites in particular the events of putting in contact with major asset managers, support during commercial missions to New York, Tokyo and Abu Dhabi, or the development of a relationship with the embassy in Paris at the time. where the startup wanted to develop abroad.

For her , there is no doubt about the ambitions of the British government with regard to the Fintech sector: “the United Kingdom has really redoubled its efforts in the field of Fintech and attaches a lot of importance to it.”

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(Featured image by dimitrysvetsikas1969 via Pixabay)

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First published in Maddyness. A third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.

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