New research from trade body Innovate Finance shows that venture capital and private equity investment into UK fintech firms totalled $4.9bn in 2019, leaping 38% from $3.6bn in 2018. The majority of the 10 largest fintech deals in Europe in 2019 were from UK firms.
What’s behind this fintech boom, and what does it mean for financial services Marketers?
The rise in fintech fortunes
We reported back in July last year that UK fintechs were attracting rising investment in spite of the prospect of Brexit, with investments continuing to rise in value as well as number.
While this picture continues across Europe – with European fintech investment increasing 49% to $8.5bn in 2019 – global investment has been falling, largely due to a huge 93% decrease in investment in Chinese fintechs. The US remains the largest market for global fintechs, with investment of $16.3bn across 1,095 deals in 2019.
The new research shows that London remains the centre of fintech in the UK, receiving 88% of all investment in 2019. This is consistent with a report from 2019 which showed that London had overtaken New York to become the global epicentre of fintech investment.
Why is the UK such a fintech hub?
Quoted in an altfi.com article on the research, Freddy Kelly, CEO and co-founder of fintech Credit Kudos, cites engagement between fintechs and large organisations as key, largely as a result of open banking.
The Financial Conduct Authority’s enthusiasm for innovation also helps here: the financial regulator has been supportive of fintech, as we reported last November.
How does the growth in fintech impact Marketing?
If you’re a financial services Marketing professional, the growth of fintech could be both an opportunity and a threat.
If you’re an established bank, innovation and fintech could be seen as a danger. There’s a perception that innovation is only for start-ups – although as we have explored previously, you don’t need to be a start-up to be a disruptor.
The FCA’s work in this area supports this. In 2016, the regulator launched a New Bank Start-up Unit, designed not just to help new firms, but to enable existing firms to launch new models.
The Authority’s Regulatory Sandbox, meanwhile, gives regulated firms a space to innovate without incurring the full weight of regulation – with the list of companies approved to join so far including both start-ups and established banks.
Fintech could therefore also be a real positive opportunity for Marketers in established banks.
And of course, if you work in marketing for a fintech, you’ll already be ahead of the game when it comes to innovation. The challenge for disrupter firms might be different; getting customers to buy into new models and earning their trust. This is something some firms are struggling with, as a lack of trust has been shown to be hindering the growth of challenger banks.
How can UK financial services capitalise on the fintech boom?
London and the UK as a whole are clearly central to the fintech revolution.
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.
Regulatory compliance will of course be essential if you’re a regulated business. You need to marry innovation with compliance if you want to succeed in a way that doesn’t jeopardise your good governance. And any new solutions need to be approached with caution, as we examined in a previous blog asking whether fintech could be the cause of the next financial crisis.
For those firms that successfully combine the need to innovate with the need to meet regulatory compliance requirements, the potential rewards are compelling.
Regulated marketing – an ever-changing role
The growth in fintech is just one example of the constant change regulated Marketers are faced with.
If you want to read more about your evolving role – and strategies you can use to tackle the challenges you face – you can download a free copy of our whitepaper on the changing role of the financial services marketing manager from our resource library.
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