Data and Research

Fintech: the sweetheart sector of UK tech

Data & research, Fintech

Henri Egle SorotosHenri Egle Sorotos, June 13, 2018

For a long time London has been the European capital of finance. In the East of the city, hundreds of financial institutions dominate the skyline and the economy. Yet times are a changing, and tech has come in to disrupt. Welcome to the UK fintech revolution, but it’s mainly London joining the party.  

Fintech is the coming together of finance and technology to disrupt existing practices. In the words of Morning Star, these are “businesses that leverage new technology to create new and better financial services for both consumers and business”. These firms were partly the result of the financial crisis – massive public distrust of traditional financial institutions meant there was a need to do things differently and shake up the sector. Add a few strategic industrial policies, and hey presto, we’ve seen a boom in new tech businesses offering both B2B and B2C solutions.

So what does the UK fintech landscape look like? In short:

  • 788 high-growth fintech companies across the UK at all stages from seed to a market exit or sale.
  • 71% of these companies can be found in London, but surprisingly only 130 are in the City.
  • While fintech firms can be found in all UK regions, regions such as the North East (6), Yorkshire & Humberside (6) and Northern Ireland (8) are home to far fewer compared to London, the South East and East of England (653).
  • Nearly half of all UK fintech firms are still at seed stage, far higher than the entire UK tech sector.
  • £2 billion was raised by fintech firms in 2017. This is twice the amount raised in each of the three years before. Exciting times.
  • The UK’s 788 fintech companies dwarf the combined total of 441 French and German outfits.
  • Analysis of Standard Industrial Classification codes reveals that very few fintech businesses are classified as banks. Many are classified as software or other financial service providers.

Fintech is a blossoming sector. But it would be unfair to produce this analysis without acknowledging the London centrism of fintech – the (not so subtle) elephant in the room. The mass majority of fintech firms are within the confines of the M25, and even more can be found in the capital’s shoulder towns such as Guilford and Reading.

Yet, many are choosing to set up shop outside the traditional financial heartlands of the City of London and Canary Wharf. Fintech businesses in Hackney and Westminster are thriving with 150 companies between them, while nearby Tower Hamlets (home to Canary Wharf) only supports 44 businesses.

But it’s not all about London, surely? Well the next largest regions for fintech are the South East and East of England which surround the capital. When we break it down, this geographic bias is unsurprising. London has always been home to the UK’s and Europe’s most dominant financial services. It is also the centre of governance and financial regulation nationally. In an industry so dependent on legal rules, being close to regulators is invaluable. For instance, initiatives such as the FCA’s fintech sandbox allow new firms to innovate in a closed and safe environment, but the authority’s head office is in East London. Equally, almost all of the UK’s premier fintech accelerators are based in the East End. 85% of the accelerators UK fintech firms have attended have also been in London. These pull factors add up, and go some way to explain London’s dominance in the field.

Yet some firms are blossoming outside the capital. Durham-based Atom Bank is revolutionising commercial lending. Its customer-centric approach to banking makes getting a personal mortgage or loan easy as chips. Even more geographically surprising is Penarth-based Wealthify, an investment platform for the everyday person. Earlier this year the company exited having raised just £2.14 million in investment. Fintech North has also sprung up to showcase the best Fintech companies the Northern Powerhouse has to offer. Impressive stuff!

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Data was sourced from the Office for National Statistics, Beauhurst and Pitchbook.

Applications for Tech Nation’s national Fintech growth programme are open until 17 July 2018.