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Fintech is transforming the UK

By building and boosting the UK's economic future. 

Adriana Amato Mar 03, 2020

Last year was yet another blockbuster year for the UK’s booming fintech sector. British fintech companies attracted £37.4bn of investment in 2019. That’s 91% higher than last year, according to data released by KPMG and the UK accounted for 83% of all European fintech funding in 2019.

These are chunky numbers, to be sure. But for consumers or anyone outside the startup ecosystem, these figures can seem abstract. This is the finance sector after all, aren’t big amounts part and parcel of the industry? Well, yes – but this investment matters on two key fronts.

Firstly, there’s the halo effect of a booming fintech sector on our economy. A nucleus of high-performing, innovative businesses operating and hiring in the UK is good for our national prosperity.

At a time where many national and regional economies are struggling to move beyond industries like manufacturing, it’s wonderful that the UK is in the driver seat internationally when it comes to the digital transformation that’s happening across the world.

 

A subtler revolution

 

The sci-fi writer William Gibson makes the point that societally transformative events are usually quite hard to notice. Their scale means that we often live through them without really noticing. Things change gradually, there is rarely a big bang or some sort of clapperboard that immediately creates a divide of then and now.

Something similar is happening in finance. To really see how much things are changing, you do need to read the tea leaves a little bit. This enormous cash infusion into the UK’s fintech sector offers a rare, clear look at how our society is changing.

The big theme that emerges, when we take a closer look at all that investment, is diversity. It’s all manner of products and sectors. Fintech has moved far beyond the base pitch ‘banking but better’.

In fact, the partnership approach – where incumbent banks partner with fintechs – is increasingly common. Overall, these numbers show that a digital revolution in financial services is underway, but its impact isn’t well defined or completely understood yet.

What to expect from the decade ahead

 

One of the most polarising debates under the already polarising umbrella of Brexit concerns national borders. The UK, after this year, will leave the EU and freedom of movement will go with it.

The trends are similar all over the world. Donald Trump’s nationalistic rhetoric, for example, has been well noted. Thing is, though, these changes and political shifts have lost some of their punch when compared to the past.

Between 1633 and 1850, for instance, the rulers of Japan policies enforced a principle known as ‘sakoku’ or ‘closed country’. For over two hundred years, the Japanese government was able to completely isolate the country from the outside world.

But those were simpler times. Despite various geopolitical tensions, cross-border transactions are due to top $2tn over the next few years, according to McKinsey. Far from shrinking, the economic horizon for businesses in the 2020s is due to expand enormously.

While there’s little you can do to control the machinations of politics, know that ‘sakoku’ is increasingly unlikely (or, indeed, impossible). 
 

 

Keen to learn more about where the industry is heading relating to business finance, book in a time slot and one of the team will catch you up. 

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