The UK continues to be ranked as one of the most fintech-friendly countries in the world.
The sector is home to many of the world’s largest fintech companies and is comprised of more than 1,600 firms – a number projected to double by 2030. It is well reported that the UK is a top financial technology hub, but why?
Despite the potential detractions of Brexit and being the sixth largest economy, the UK remains a top destination for financial technology investment, second only to the US, and some way clear of India in third. In Europe, $9.1bn (£7.3bn) of investment in 2022 is larger than Germany, France, Sweden, and Italy combined.
In terms of fintech investment per capita and as a percentage of GDP, the UK is second only to Singapore.
Country | FinTech Inv 2022 (bn) | Population (mn) | FinTech inv per capita | GDP (tn) | Fintech Inv % GDP |
US | $25.1bn | 331,893.74 | $75.63 | $23,315 | 0.11% |
UK | $9.1bn | 67,326.57 | $135.16 | $3,131 | 0.29% |
India | $3.9bn | 1,407,536.84 | $2.77 | $3,175 | 0.12% |
Germany | $2.4bn | 83,196.08 | $28.85 | $4,260 | 0.06% |
France | $2.3bn | 67,749.63 | $33.85 | $2,958 | 0.08% |
Singapore | $2.1bn | 5,453.57 | $385.07 | $397 | 0.53% |
Indonesia | $1.3bn | 273,753.19 | $4.75 | $1,186 | 0.11% |
Brazil | $1.2bn | 214,326.22 | $5.60 | $1,609 | 0.07% |
Canada | $0.8bn | 38,246.11 | $20.92 | $1,988 | 0.04% |
Australia | $0.6bn | 25,688.08 | $23.36 | $1,522 | 0.04% |
| Source: Innovate Finance, World Bank | |||||
The reality is that multiple forces and factors have created a perfect storm for fintech growth in the UK.
A global financial centre
Setting aside the fintech scene, the UK has a strong financial services sector, which is central to the economy and makes the UK the highest net exporter of financial services globally.
Many financial hubs have emerged, not least in Edinburgh and Manchester, but London continues to be a global financial centre. The favourable timezone and English being the native language makes it easy to do business across all major markets, while London has the world’s highest concentrations of financial firms.
This concentration of activity represents an exceptional platform for fintech, offering ease of access to a wider financial ecosystem.
Access to investment and capital
Fintech accounts for about 50 per cent of venture capital in the UK. As macro-economic conditions usher in a slowdown in the number of deals and level of capital investment more broadly, investment in fintech grew 24 per cent in the first half of 2022, compared to the same period in 2021.
This year may see access to capital become more challenging, but many believe difficult economic conditions will only serve to propel the fintech sector further forward by creating an environment for entrepreneurship and innovation, as consumers look to different ways to manage their finances in a cost of living crisis.
Regulation and law
It is no coincidence that Singapore and the UK, where fintech investment is highest as a percentage of GDP, have globally respected regulatory frameworks, good infrastructure, and political, economic, legal, and social stability.
While there is no specific regulatory framework for fintech, the Financial Conduct Authority was quick to recognise the benefit innovation can have for consumers and markets and developed a more nurturing environment through its innovation hub and sandboxes.
The sandbox offers approved fintech firms' access to regulatory expertise and the ability to test products with real consumers. The sandbox approach has since been copied globally with the FCA becoming a key influence in setting the standards of international regulation.
