London overtakes New York to be top city for fintech investment

Rocket New research published this week shows that London has overtaken New York as the capital of fintech deals.

The report, published by industry body Innovate Finance along with London & Partners, reveals record investment in the UK fintech sector. It also finds that London attracts the largest number of international fintech investors.

London – the world’s fintech leader

The statistics put London in the top spot for number of deals secured; in the first eight months of the year, London attracted 114 investments with a value of more than $2bn (£1.6bn). London-based companies accounted for half of the 10 largest European investments recorded so far in 2019.

New York is in second place on number of deals, with San Francisco third; San Francisco pushes London into second place on deal value. The US overall remains the largest global fintech market, raising $9.4bn so far this year, against the UK’s $2.3bn.

London’s place in the rankings is helped by the number of tech ‘unicorns’ – companies with a valuation of more than $1bn – based here.

And, as CityAM reports, UK fintechs continue to attract rising investment in spite of the prospect of Brexit. This may in part be due to London’s ability to attract non-European investors; 39% of the UK’s fintech investors come from outside Europe.

Investments continue to rise in value as well as number; firms raised an average of £20m in 2019, up from £15m in 2017, according to a separate survey carried out by EY and Innovate Finance, and released last week. In their next funding round, the firms expect to raise a total of £2.6bn.

What challenges face the UK’s fintech industry?

Although the UK’s fintech position sounds strong, the CityAM article reports that ‘Fintech founders urged the government to “not be complacent” about the UK’s fintech dominance last month’.

With the UK’s planned departure from the EU edging closer, and talk of a global slowdown, it would be wise to stay pragmatic about London’s dominance of fintech investment. We’ve looked before at whether London will miss out on fintech innovation after Brexit.

Other challenges facing the industry are summarised in the EY/Innovate Finance survey:

  • Recruiting suitable talent. This was a significant concern for the majority of the 224 companies surveyed. 53% cited it as a major challenge.
  • This is exacerbated by the fact that the most sought-after skills – software engineering, system architecture, and development – are among the hardest skills to find.
  • Gender imbalance persists throughout the industry; only 29.5% of the fintech workforce are female.
  • Among fintech founders, the picture is even more stark, with just a quarter of fintech firms having a female founder – a figure that hasn’t changed since 2017.

How can UK financial services capitalise on the fintech boom?

With London and the UK as a whole at the centre of the fintech revolution, many existing financial services firms are exploring how to get in on the action.

After all, you don’t have to be a start-up to be an innovator. Many established financial services firms are expanding their offerings and joining the ranks of the fintechs. Read more about digital transformation in the finance sector.

If this is something your firm is keen to explore, our tips on exploiting digital transformation in banking and minimising risk in digital transformation will be useful.

If you’re a regulated business, you need to stay on top of regulatory requirements. Marrying innovation with compliance is vital. And any new solutions need to be approached with caution, as we examine in Could fintech be the cause of the next financial crisis?

You can read the full London & Partners/Innovate Finance report on London’s dominance of the fintech sector here and the EY/Innovate Finance Fintech Census here.

You might also want to read more about the ways the role of the regulated Marketing Manager is changing – in part due to innovation. You can download a free copy of our whitepaper on the changing role of the financial services marketing manager from our resource library.

Nothing in this document should be treated as an authoritative statement of the law. Action should not be taken as a result of this document alone. We make no warranty and accept no responsibility for consequences arising from relying on this document.

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