UK FinTech: Moving Mountains And Moving Mainstream
UK FinTech:Moving mountains andmoving mainstreamInternational perspectives to shapethe UK FinTech landscape.Minds made for transformingfinancial services
ForewordsCITY OF LONDONIf there was ever a need for technology to focus onthe good it can do in this world, it’s right now. As theCOVID-19 pandemic swept across the globe, changingour lives in unprecedented ways, it’s technology that’sbeen our ally, sitting astride this pandemic and keepingus connected.Technology is already enabling us to work from home,attend virtual conferences, bank online and via apps, andreceive food and entertainment.I am grateful for the important work undertaken by EY inproducing this report. It provides essential insight and ahelpful baseline for the independent Review into UK FinTech,as announced in HM Treasury’s Spring 2020 Budget.Catherine McGuinnessChair of the Policy and Resources Committee,City of LondonIn financial and professional services, the UK has madesignificant progress to establish a thriving FinTechsector encompassing not only emerging start-ups, but asignificant amount of innovation by our more traditionalinstitutions. Its depth and breadth of expertise in bothfinance and technology, coupled with progressive policyand regulation, has established the UK’s position as theglobal leader in FinTech.We are now entering a crucial moment in the developmentof UK FinTech. For this activity to continue to translate intoeconomic growth, we need to ensure that entrepreneurscan scale-up, expand internationally and deliver onFinTech’s transformative promises to bring prosperityto all parts of the country.The City of London Corporation and Innovate Financecommissioned this research to better understand theneeds of the sector, learn from the practices of comparableinternational hubs, and to catalyse the next steps in theevolution of UK FinTech.As we emerge from the depths of the COVID-19 pandemic,it will be more important than ever that we implement adigital strategy that is grounded in sustainable innovationthat drives inclusivity, better access, more choice,competition and national connectivity.2UK FinTech: Moving mountains and moving mainstreamUK FinTech: Moving mountains and moving mainstream3
Forewords continuedINNOVATE FINANCEWhen we commissioned this report with the City of LondonCorporation earlier this year, the COVID-19 pandemicwas yet to emerge as a global threat. Fast forward a fewmonths and no one could have anticipated the tremendousdisruption that this pandemic would cause to our economyand the financial services system.One of the key strengths of the UK FinTech sector is itsability to adapt and innovate to meet challenges and seizenew opportunities. The urgent need for this dynamism wasbrought into sharp focus as businesses closed, consumersisolated and economic activity came to an abrupt halt.Within days, FinTechs were responding to the pandemicand building new products and services to meet the needsof UK citizens. Helping carers to shop for those whowere shielding, allowing the self-employed to verify theirincome for state support, and supporting businesses toaccess emergency finance were just some of the solutionsdeveloped within the sector.The wider impact of the ongoing situation is as yet stillunclear, and we can expect the economic uncertainty to lastfor some time. What we do know is that digital adoption andtransformation has accelerated as a result, and this trend isset to continue, opening up opportunities for UK FinTech tosupport households and businesses as they emerge from thepandemic. With our vibrant ecosystem of start-ups, scaleups, high-growth firms and financial institutions, we shouldproactively use innovation to shape a more cohesive andtech-enabled financial services system that can withstandfuture disruption.In order to meet this challenge, we need to understandwhat makes the UK a global FinTech leader, and whereopportunities lie to strengthen our position againstinternational competition. This research provides aperspective into the ecosystem for policymakers,regulators, institutions, industry bodies and FinTechs.It is a solid basis on which we can build our understandingof innovation within financial services, and what changescan be made to enhance our performance as a sector –whether that be in policy and regulation, talent and skills,national connectivity, or capital and investment.4UK FinTech: Moving mountains and moving mainstreamEYThis report, and the forthcoming review of UK FinTech, willenable the sector to build a shared blueprint for growth thatpromotes choice, transparency, inclusion and innovation infinancial services.Charlotte CrosswellCEO, Innovate FinanceWhen HM Treasury engaged us to benchmark the FinTechlandscape in 2016 (UK FinTech: On the Cutting Edge),the FinTech market was nascent and growing; value wasalready being realised with 6.6b1 revenue generatedwithin the UK alone. We anticipated that the FinTech sectorwould be an engine of growth, driving innovation andtransformation across the financial services sector.Fast forward to 2020. We were intrigued to understandwhether the potential of FinTechs that we felt in 2016had transpired in 2020. On the one hand, what wediscovered in the period leading up to 2020 and beforethe COVID-19 pandemic was a positive growth story. Wewitnessed a growth in capital invested, greater supportfrom policymakers and regulators internationally,improved quality and volume of FinTech talent, and bettercollaboration amongst FinTechs and financial institutions,all of which offered the opportunity to scale. The impact onthe economy remains significant, with revenue generatedby FinTechs in the UK nearly doubling to 11b in 2019.On the other hand, we still witnessed more start-upsthan scale-ups and recognised opportunity to enhanceinnovation and fuel growth within the sector.With this report, our aspiration is to present our researchfindings and provide insight into leading best practicesacross influential global markets, with an ambition tochallenge policymakers, regulators, investors, banks andeven FinTechs themselves, to stimulate greater innovationand inclusion in financial services in the UK.The COVID-19 situation has shone a light on the resilience,robustness and importance of many FinTechs. We haveseen some thrive; their sense of purpose and relevancehas been critical during the pandemic, observed by theincredible effort and commitment they have put towardssupporting consumers and small and medium enterprises(SMEs) through this turbulent period. Yet, we also know ithas put significant pressure on many others. We believethat there is much to learn from our analysis and it is ourfirm belief that our recommendations, implemented as awhole, have the potential for a far wider reaching impacton UK financial services and the economy. While the fullimpact of COVID-19 on the sector is yet to be seen, theFinTech industry is expected to remain resilient and withthe right support, to thrive.The analysis, views and recommendations expressed inthis report were produced by EY and informed by over100 interviews held with FinTech firms, investors, tradeassociations and policymakers. The EY team is grateful toall who contributed their time and made the production ofthis report possible.Anita KimberPartner, UK Financial Services Transformation,Ernst & Young LLPWhen it comes to FinTech today, we no longer see clear‘leaders’ within markets; FinTech globally is being adoptedat scale, but the way different markets have fuelled growthhighlights differences in attitudes to innovation. We realisethat ‘leadership’ in FinTech globally has become moreambiguous, depending on whether investment, talent, andadoption are deemed as the most important criteria. Animportant question to ask now is how to scale, hence ourfocus on moving mountains and moving mainstream.1“UK FinTech: On the Cutting Edge”, UK Government website, accessed via ech-on-the cuttingedge, 16 June 2020.UK FinTech: Moving mountains and moving mainstream5
Interview programOur extensive interview program covered over 100 interviews across industryparticipants and market experts. We would like to acknowledge the contributionof the below participants:03Forewords107Global assessment: case study markets06Interview program108Case study market: CanadaBrighte08Executive Summary112Case study market: FranceGeorgia FinTech AcademyData Republic09Introduction117Case study market: Hong KongBlue Fire AIMotive PartnersFerocia Software10International markets – basis for selection122Case study market: NordicsBritish Business BankNorthOneFinTech AustraliaConsiderations for future policyCongressman Patrick McHenryPaypa Plane11 The components of a well-functioningFinTech ecosystem127Cicero/AMODepartment for International TradeSix ThirtyReinventure12 UK – a proactive policy agenda128A leading scale-up ecosystemDLA PiperStatus MoneyUP131 Globally leading FinTech talentFinancial Conduct Authority (FCA)TTV CapitalWisrUnited KingdomUnited StatesAustraliaAugmentumAmex VenturesAustralian Securities and Investments CommissionBank of EnglandCarolina FinTech HubBankableFinTech NorthFinTech Northern Ireland14UK – commitment to innovation16A comparative snapshot of in-scope regions18Considerations for future UK policy137 A targeted approach to inbound andoutbound FinTech22Overview of COVID-19 impact on FinTech138An integrated national digital agenda23COVID-19: Opportunities for FinTechs142Deep and diverse sources of FinTech demand24COVID-19: Impact on the economy and financialservices sector144Appendix25COVID-19: Impact on UK FinTech ecosystem145 Appendix A: UK FinTech market sizingmethodology146FinTech ScotlandIndiaSingaporeFinTech WalesEconomic TimesApis PartnersFinTech West8i VenturesBambuFunding CircleFinTech Convergence CouncilCompareAsiaGroupGovernment Digital ServiceIDfyNium Pte. LtdHM TreasuryJupiterMonetary Authority of SingaporeInnovate FinanceNiti AayogPercipient, Singapore27COVID-19: Impact on UK FinTech AttributesSingapore FinTech Association32COVID-19: Impact on core markets37Conclusions and considerations38Overview of the UK FinTech sector39Introducing the UK FinTech sectorLendInvestOakNorthOnfidoOpen Banking Implementation EntityCanadaNordicsPinsent MasonsBorrowellABN AmroRevolutBreathe LifeCoppenhagen FinTech42Analysis of Attributes: TalentRippleFerst Capital PartnersNets Group46CapitalNatWestFinance MontrealNordnet50Policy and infrastructureSalary FitsAutorité des marchés financiers du QuébecNorfico56DemandSir Ken OlisaLuge CapitalSEBThought MachineNational Bank of Canada – VenturesSweden FinTech Association60Regional FinTech clusters in the UK64Global assessment: core marketsHong Kong SAR65Core market: AustraliaVisaFrance77Core market: IndiaWorldpay from FISFinance InnovationAlipayHK85Core market: SingaporeWhitecap ConsultingFrance FinTechArbor VenturesKardHong Kong Monetary Authority97Core market: USAOpen CNPInvestHKSherwoodLivi BankTransferWiseUK FinanceCore markets6Contents135 A network of diverse and vibrant regional centresContactsCase study marketsUK FinTech: Moving mountains and moving mainstreamUK FinTech: Moving mountains and moving mainstream7
ExecutiveSummaryIntroductionThe research in this report shows that the UK is a globalleader in FinTech, with a world-class and well-roundedecosystem. The combination of financial and technicaltalent is unparalleled, and capital is strong, with nearly 3.6b1 invested in FinTech in 2019. In policy andinfrastructure, the UK has set the global benchmarkfor policy-led innovation, with key initiatives includingthe FCA’s regulatory sandbox, open banking and theAI Sector Deal frequently cited as internationallydistinctive. And from a demand standpoint, consumers,SMEs, corporates and government are key usersof FinTech; more than two-thirds of digitally activeconsumers now benefit from FinTech services.The recommendations, taken holistically, will enablethe UK to stimulate greater innovation and inclusionin financial services. The pandemic has showcased theimportance of FinTechs’ role within the ecosystem, and as aresult the recommendations in this report could be used toaccelerate transformation and growth. They are positionedto be pragmatic and achievable as we embark on a periodof recovery following the COVID-19 pandemic, supportinggrowth by ensuring the right access to capital and talent.For example, the focus on FinTech could support a nationaltalent strategy that increases and diversifies the domesticsupply of talent, addresses skills gaps and works moreclosely with academia to attract talent to the sector.Relative to more nascent FinTech ecosystems globally,our hypothesis is that the UK should be better positionedto weather the challenges resulting from the COVID-19pandemic. FinTech has an important role to play as acatalyst for innovation and inclusion in financial servicesand should be looking to enhance its role as a growthengine of the economy, as the UK begins its recovery.We also address the opportunity across the UK:not just in London, but in vibrant regional clusters,as we look to make the UK, as a whole, the destinationof choice for FinTechs. This needs to be underpinned by anintegrated national digital agenda, linked to world-leadinginfrastructure that provides comprehensive, safe andsecure access to innovative financial services.The report was commissioned in January 2020 tounderstand best practices from comparable internationalmarkets and develop specific considerations for thenext stage of FinTech evolution. The intent of this reportis to trigger sustainable innovation that helps to drivethe democratisation of access to financial services forconsumers and SMEs, including those unbanked orunderbanked. We also aim to increase the level of choice,competition and national connectivity. Considerationsin this report are inspired by our research across eightmarkets, and how these markets have rapidly progressedtheir FinTech environments, level of innovation,digital infrastructure and ambitions.The UK must chart its path for the future at this criticaltime in its history, creating new jobs, forging newinternational relationships and defining its role as aleader in technology and data. UK FinTech now has theopportunity to enhance its position as a leading FinTechscale-up environment that develops and nurtures thenext cohort of UK-supported, globally leading financialinstitutions (FIs). This requires us to encourage FinTechs,banks and tech firms to take the next steps to transformfinancial services and rebuild the UK economy. Pitchbook database; 2019 FinTech Investment Landscape, Innovate Finance, 2019 (accessed via -investment-landscape/, 29 January 2020).18UK FinTech: Moving mountains and moving mainstreamUK FinTech: Moving mountains and moving mainstream9
International markets – basis for selectionIn this report, we investigate the strengths and challengesof other leading global ecosystems (identified as ‘core’markets), namely Australia, India, Singapore and the USA.These markets were jointly selected by EY, the City ofLondon Corporation and Innovate Finance as those that arerelatively mature FinTech environments and, importantly,provide potential learnings from a policy standpoint for theUK. For example, India’s recent development of innovativenational infrastructure, Australia’s early applications ofopen data, Singapore’s progressive regulatory regime,and the emergence of several regional FinTech clustersin the US.This analysis is complemented by a more thematicreview of selected FinTech sectors (identified in this reportas ‘case study’ markets) Canada, France, Hong Kong andthe Nordics. These case studies highlight key themes suchas the importance of digital infrastructure (Nordics), bank/FinTech collaboration (France) and leveraging academiaas a catalyst to enrich a FinTech ecosystem (Canada andHong Kong).We recognise that, beyond these eight markets, otherFinTech hubs such as mainland China have rapidly scaled.We have not analysed such ecosystems as part of ourresearch, based on divergence of regulatory landscapesrelative to the UK and, therefore, the potentially limitedopportunity to derive policy learnings.‘Core’ marketsMarketRationaleAustraliaMaturing FinTech environment withactive government policy; exploringearly applications of open data policybased on learnings from other markets.IndiaRapidly emerging hub with severalinnovative national infrastructureplatforms, including Aadhaar and theUnified Payments Interface (UPI).SingaporeUSAMature and scaled FinTech market, withsubstantial access to talent and capital;recent development of several regionalclusters.The figure below highlights how these four Attributesinterconnect and identifies the network of broaderstakeholders.FIGURE 1.0 T he FinTech EcosystemWe believe a well-functioning FinTech ecosystem is builton four core ecosystem attributes (Attributes):EntrepreneursAcademiaTraditionalFIs1. Talent: the availability of technical, financialservices and entrepreneurial talentAngelinvestorsTalent2. Capital: the availability of financial resourcesfor start-ups and scale-ups3. Policy: government policy across regulation,tax and sector growth initiatives, includingthe presence of digital public infrastructureto facilitate financial services innovationTechnologyfirmsConsumersVC and 4. Demand: end-client demand acrossconsumers, corporates, FIs and governmentCorporatesIPOinvestorsPolicy fferentiated talent policy implementedto facilitate rapid access to global talentpools; emerging presence of centres ofexcellence in AI.Hong KongSARNordicsUK FinTech: Moving mountains and moving mainstreamProactive regulatory regime with theMonetary Authority of Singapore (MAS)spearheading an array of infrastructureand policy initiatives.The strength of a nation’s FinTech ecosystem is dependenton a wide range of attributes and factors. Before profilingan ecosystem, we believe it is important to consider theseattributes, and draw conclusions of where the ecosystemexcels and/or is challenged.‘Case study’ marketsFrance10The components of a well-functioningFinTech ecosystemRecent strength in government supportand ambition to be a leader in financialservices within the EU.High-potential market with emergingpresence from non-bank participants;active involvement of the Hong KongMonetary Authority (HKMA) to supportthe ecosystem.KEYAttributesRegulatorsStakeholdersWe leverage this framework throughout this reportto provide an overview of the UK FinTech ecosystem,understand the strengths and best practices across keyglobal hubs, and extrapolate findings to progress thebroader financial services innovation environment. Onpages 18-21 and in section 5, we offer considerations forUK policy. We use this framework to highlight the primaryAttributes addressed within each of the considerations.Strong industry-led innovation acrossa highly digitised financial serviceslandscape.UK FinTech: Moving mountains and moving mainstream11
A proactive policy agenda has helped the UK to maintain amarket-leading ecosystem for innovation in financial servicesKey ecosystem strengthsThe UK remains a global FinTech capital. We estimate thatthe UK FinTech sector represented c. 11.0b1 in revenue in2019, up from c. 6.6b in 2015, and now accounts for c.8%of total financial services output. In the last five years, theUK FinTech sector has moved mainstream, having inspiredand stimulated innovation in broader financial services andtechnology sectors.The range of ecosystem participants has also expanded wellbeyond FinTech start-ups, with innovation driven throughcollaboration between FIs, innovation labs, policymakersand trade bodies. Emergence of technology players in theUK and on a global basis is particularly notable. For largertech companies (inclu
helpful baseline for the independent Review into UK FinTech, as announced in HM Treasury’s Spring 2020 Budget. Catherine McGuinness Chair of the Policy and Resources Committee, City of London 2 UK FinTech: Moving mountains and moving mainstream UK FinTech: Moving mountains and moving mainstream 3
FinTech waves – Italian FinTech Ecosystem 2020 2 Research goals and methods 3 Executive summary 5 Update post COVID-19 8 1 Financial services trend 10 Global trends 11 Europe trends 13 Italian trends 16 2 The FinTech market 26 FinTech environment 27 Global trends 29 Europe trends 39 Italian trends 45 3 Italian FinTech ecosystem 53 4 The investor
Overall fintech investment Inclusive fintech investment Inclusive Fintech 50 applicants 4 inclusivefintech.com Fintech investment is booming. In 2018, a record USD 111.8 billion1 was invested in fintech, and the sector garnered extensive media coverage2 and interest.3 But despite fintech's growing profile—and even though it can help unlock trillions of dollars in value4 by reaching
FinTech and the Automotive Industry There are many synergies between FinTech and the automotive industry Highly regulated industries Focused on promoting consumer/user experience Data is critical to all aspects of the industry FinTech - Changing the Game Automotive industry now embracing FinTech, propelled by:
sector. Nigeria is now home to over 200 fintech standalone companies, plus a number of fintech solutions offered by banks and mobile network operators as part of their product portfolio. Between 2014 and 2019, Nigeria's bustling fintech scene raised more than 600 million in funding, attracting 25 percent ( 122 million)
Only a few paper examines the expansion of Fintech lending to small businesses.Gopal and Schnabl(2020) find that finance companies and Fintech lenders substitute banks in small business lending market after the Global Financial Crisis, while Balyuk et al.(2020) document the differential effects of banking lending on Fintech growth
Only a few paper examines the expansion of FinTech lending to small businesses.Gopal and Schnabl(2020) find that finance companies and FinTech lenders substitute banks in small business lending market after the Global Financial Crisis, whileBalyuk et al.(2020) document the differential effects of banking lending on FinTech
investment in fintech in the USA, Europe and Asia for 2014-2016. Тable 1. Investment in FinTech, 2014-2016 bln.US (KPMG, 2016). Region 2014 2015 2016 USA 14.1 27.4 13.5 Europe 12.0 10.9 2.2 Asia 3.3 8.4 8.6 As can be seen from Table 1, the total volume of investment in fintech in these regions was 46.7 billion in 2015.
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