London fintech punches above its weight, but it must still be at the forefront

As other cities continue to lure away our London tech firms and other investment, we must work even harder to stay competitive, writes Chris Hayward.

If ever there was a sector where the UK punched well above its weight, it’s our fintech and start-up scene. The UK’s world-leading fintech sector has a global market share of 10 per cent and our success is reflected in the historic levels of investment in the sector over the past five years.

Fintech brings together our existing strengths in financial services with our growing technological expertise. The result is a sector that ranks third globally in terms of invested venture capital, behind the USA and China. Last year alone, over $12.5 billion was invested in fintech in the UK. This investment supports our outstanding fintech companies, of which over half of Deloitte’s top 50 fintech firms are based here in London, while a further 2,000 businesses are spread across the UK in fintech hot spots such as Cardiff, Leeds, Edinburgh and Bristol.

To truly reap our fintech rewards, to ensure that London and the wider UK remain a world leader for years to come, we need a concerted effort to continue to innovate, build partnerships and invest. The Kalifa Review, published in early 2021, warned that a “digital big bang” was needed for the UK to remain competitive in the sector.

A key recommendation was a center for finance, innovation and technology to strengthen national coordination across the fintech ecosystem to boost growth. This was finally launched recently, with financial support from the Treasury.

Since Kalifa, the government has worked closely with industry and regulators to deliver on other recommendations, including introducing a fast-track visa system for fintech scale-ups to make it easier for firms to recruit and retain talent.

Most crucial is the continued work to reform our listing regime to keep London an attractive destination to list. This has gained increasing attention in recent weeks, as firms continued to choose the US over London. The City of London’s annual benchmarking report for global financial center performance has highlighted the increasing levels of investment being drawn away from our shores. Part of ensuring these businesses aren’t drawn to Wall Street or elsewhere is closing the funding gap that high-growth companies like those in fintech face.

The UK’s strengths in fintech are in areas such as payments, wealth technology and, in particular, regulatory technology. With regulations growing and evolving to keep pace with technological change, it is up to businesses to be proactive and detect and prevent compliance issues within their own operations, but for many this is costly and ineffective. Regulatory technology creates a cost-effective way to deliver productivity gains and keep costs down – important requirements if a firm is to remain competitive in financial services. The sector has attracted nearly £14 billion in funding over the past couple of years.

We should nurture competitiveness within fintech. The City of London Corporation and Innovate Finance are working together to build on this. Creating additional successful regulatory technology will enable all future fintech companies to succeed in the future, with a strong backbone to focus on growth while meeting regulatory requirements.

Since the Kalifa Review, our fintech sector has made significant progress, going from strength to strength. It is imperative that we collectively, across government, regulators and industry, continue to address the challenges facing the industry and do all we can to maintain our fintech crown.