The State Of Fintech In The UK

London might have positioned itself as the home of European Fintech, but what happens when a new wave of Fintech start-ups want to scale-up?


The way consumers and businesses spend, save and invest money has changed dramatically over the past few years, with start-ups utilising technological innovation to disrupt the traditional financial services industry.


And thanks to the close proximity of the City and Canary Wharf’s long-established financial services sectors and Old Street’s booming technology sector – dubbed Fintech’s Silicon Valley – many have chosen London as their home.


In addition, current tax break incentives such as the SEIS, which allows an investment of £100,000 in a start-up with a 50% tax break, have positioned the UK as a clear leader in Europe and the world – the sector has received $5.4bn from a total global investment in Fintech of $49.7bnsince January 2010.


It’s already an established scene – with four Fintech ‘unicorns’ operating here with a combined valuation of $18.5bn, according to a report by technology investment bank GP Bullhound. In contrast, there are two in the rest of Europe, worth a total of $4.6bn.


From start-up to scale-up


Promising to democratise the world of finance, peer-to-peer lending, crowd-funding and innovative payment platforms are rapidly gaining traction across the country, with several start-ups successfully growing their offer in recent months thanks to finance for scale-ups:


  • Challenger banks

Offering real-time information about a customer’s money, geo-located transactions, peer-to-peer transactions and historic spending data, banking software start-ups have gone from strength to strength. Having gained its full, unrestricted banking licence from UK regulators, Monzo raised £19.5 million in February 2017, led by Thrive Capital, and is also seeking a further £2.5m crowdfunding round through Crowdcube, having raised £1m in 96 seconds on the platform in March 2016.


  • Mobile payments

With the total number of contactless transactions on mobile devices reaching 38 million in 2016, it’s no wonder cloud-based payment start-ups have flourished. Processing B2B payments quicker than traditional providers, GoCardless has raised £20m in funding so far.


  • Money transfer

Providing flexible and cheaper solutions to consumers and corporations looking to move money between countries and currencies, International payments provider TransferWise is authorised by the UK Financial Conduct Authority and attained unicorn status in May.


However, with Brexit on the horizon comes uncertainty, and many are concerned that last year’s vote to leave the European Union will have an impact on the sector’s growth.


  • Equity crowdfunding

Offering an alternative means of financing, Crowdcube took the Kickstarter model (a peer-to-peer platform that enables the public to support people and initiatives through donations) and applied it to actual businesses. Offering members of the public the opportunity to be venture capitalists, the company itself has raised £6m from stockbroker Numis, Draper Esprit and Balderton Capital.


  • Alternative lending

In response to the high fees associated with traditional banking services, peer-to-peer lenders and crowd-lending companies such as Zopa and Funding Circle found their niche by cutting out the middle man when connecting borrowers to investors. Both have benefitted from venture capitalist funding in their bid to scale-up.


How Funding Bay can help

Alternatives lending includes unsecured loans, invoice finance, peer-to-peer lending amongst many others. So how do you choose which ones right for your business?

Ultimately, the method of finance that a business owner opts for will often depend on where their start-up or SME is at in terms of growth – they might be looking to maintain autonomy and generate cash immediately, or be willing to give up some control of the business in exchange for funding.

Funding Bay are a finance introducer that can find the right product for your business, as well as the right lender, dependent on your funding requirement.

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