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Fintech in the UK – Why UK FinTech creates unicorn startups?

DIGITAL VENTURES October 16, 2017 1:18 PM

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The United Kingdom is another economic forerunner of the world and is among the top of mind when it comes to FinTech. Let’s find out what influences UK FinTech and why they house several unicorn startups.

How FinTech influence businesses in the UK?

A survey by MarketInvoice, conducted with over 3,000 companies in the UK during August to September 2017, revealed that most top enterprises in the UK adopt FinTech into their businesses. This attempt helped them save up to 1 billion GBP each year, amounting to around 40 billion THB. The UK prioritizes FinTech products and services that 65% of 3,000 companies in the UK use at least one FinTech application, with 19% adopting as much as 4 applications. Such endeavor help save on average of 5,500 GBP per year or 200,000 THB per year.

In terms of FinTech products, usage involves banking transactions (23%), foreign exchanges (16%), and others. Also, around 11% of the companies explained that in the past year they have used Bitcoin or other Cryptocurrency for payment and forecasts that Cryptocurrency will be further incorporated into transactions in the UK in the coming year.

It can be observed that the reason behind FinTech’s popularity is the time and cost savings as well as the fee decrease, transparency, and improved services for the customers.

Banks are the key drivers of FinTech in the UK

An important factor uplifting UK FinTech are companies who truly understand the financial sector. Resourceful financial institutes such as Barclays, HSBC, Lloyds, UBS, and other 20 companies support the sector. For instance, UK giant, Barclays, has an accelerator program with over 40 FinTech startups. The Barclay Accelerator hold workshops, hackathons, and other learning programs that integrate various knowledge in order to build a solid foundation for the startups. Each participating team receives consultation from Barclays and Techstars network.

Moreover, being part of the program provides FinTech startups with the bank’s big data and connection to the APIs. This shall, in turn, enhance new products and services for customers. Furthermore, Barclays launched a Co-working space in Shoreditch called the Rise London. For FinTech startups, this is the largest working space in Europe. It has created a community of early-stage FinTech, organizations, and experts while allowing opportunities for corporation and business prospects for Barclays. This is how the FinTech ecosystem is nurtured for future financial advancements.

“FinTech startups are at the front of the technology wave that is changing our industry…We glean important insights; we can actively experiment with emerging technologies, and we can spot early trends and new markets as they form. This allows our employees, customers, and clients to do things faster, better, and at a lower cost.” explains Michael Harte, Group Head of Innovation at Barclays. This is an example of how banks are incorporated and dedicated to developing FinTech in the UK.

Regulators focus on development rather than control

Another key driver of FinTech in the UK is law enforcers such as the Financial Conduct Authority or FCA. They are recognized as the world’s most innovative regulators as they are constantly innovating for FinTech. FCA’s Regulatory Sandbox program encourages and supports financial institutions in developing new products and services. This “sandbox” is an experimental space where financial institutions and FinTech firms can explore their application with actual markets and customers. Companies in the sandbox will receive an approval letter that allows the firms to disregard the actual regulations yet they need to abide by the regulations of the sandbox program. This scheme encourages and supports financial institutions to deliver new products and services as well as help FinTech startups to enhance their capabilities in terms of customer experience. They will be able to evaluate whether the technology actually works before investing large sums into the project, thus, significantly reducing risks.

Previously, FCA has been criticized to exceedingly favor startups that some view that FCA please FinTech startups instead of regulating them. However, the Sandbox program helped minimize the claim because the program doesn’t only benefit startups. The Sandbox program also includes protective measures and consultation for financial institutions that seek to explore their innovation. Also, the program provides collaborating opportunities among startups and financial institutions.

FinTech Unicorns in the UK

Another factor of the advancement for FinTech in the UK is the high amount of FinTech startups in the UK. This “Home of FinTech” house different innovation with some outstanding and successful ones which have become unicorns or startups worth over 1 billion USD or 30 billion THB.

Transferwise 

Transferwise is a London FinTech startup which provides international remittance, today, this unicorn is worth over 1 billion USD. Transferwise was created by ex-Skype employees, Kristo Kaarmaan and Taavet Hinrikus. Transferwise target the working group and college students who need to transfer money internationally. Transferwise offers peer-to-peer transactions that allow users to transfer money at the current exchange rate with fees that are significantly lower than the traditional transferring process. In 2016, Transferwise received 26 million USD or 800 million THB from series D funding.

Funding Circle 

Funding Circle is also a UK-based unicorn. It offers credit services in forms of peer-to-peer lending. This online platform allows investors to directly loan to small and medium enterprises. Established in 2010 by Samir Desai, Funding Circle is the first company in the UK to provide peer-to-peer lending. In 2015, Funding Circle received funding of over 100 million USD or around 3 billion THB. Samir Desai shared in an interview that websites for lending services like Funding Circle can create over 50,000 jobs, therefore, it supports economic growth for the UK, USA, and Europe. Currently, Funding Circle is preparing for a new round of funding in 2017.

FinTech in the UK has greatly advanced and has the potential to develop quicker than other countries. This is a result of various supports from entities such as financial institutions, regulators, and tech firms who share the same goal to rapidly and efficiently develop FinTech. For more FinTech updates across the world, visit our blog.