Our fintech sector is stopping and taking the competitive pressure from the big banks

Innovation and creativity put the fintech industry ahead of the big players, but instead of pressing the gas pedal they have allowed themselves to stop and give power back to the institutional banks, writes Andrew Beckley

A cloud of uncertainty hangs over the fintech landscape. Usually so confident, the fintech ecosystem in London and the rest of the UK has taken a hit of late, with Brexit, talent shortages and a less favorable funding environment combining to leave companies and investors in a difficult situation. Even last week’s UK fintech week – usually a celebration of the industry’s offerings – was tempered by the challenges ahead.

Investment in the UK’s fintech sector fell eight per cent last year, although we remain well ahead of rival hubs in Europe and Asia. Yet fintech success stories have been few and far between in recent months amid the furore surrounding Generative AI and the growing focus on sustainability. But why is that? And what does it mean for the future of fintech and the wider financial services industry?

Fintech’s relative decline has coincided with a rebound of the institutions the industry was supposed to replace. Indeed, nothing sums up the resurgence of Big Banks like the recent fire sale of Silicon Valley Bank to HSBC shortly after Barclays took over Tech Nation’s role in the UK tech ecosystem.

Simply put, innovation and creativity puts the fintech industry ahead of the big players, but instead of pressing the gas pedal, they have allowed themselves to be stopped. For too long, entrepreneurs and their teams have had the upper hand for financial services. By following shallow money needs like splitting funds into pots, offering cashback on purchases and chasing customers on an individual basis, fintechs have lost their innovative edge and allure among the VC community.

Unfortunately, nothing in fintech has broken through as originally expected. For example, the industry has so far failed to deliver the promised Open Banking revolution. While it may yet have a big impact, investors have grown tired of the broken promises and have moved on to other opportunities.

Is there enough room left to innovate? Definitely. But this comes with a whole series of caveats. If fintech ventures largely trace back to a consolidated underlying need, they are little more than a digital front-end on an older industry. This has created an emerging sense of having lost its way, where clear-sighted leadership and bold ambitions are missing or have been burned out by the day-to-day reporting on customer acquisition. They are additions to today’s offerings, rather than pushing the boundaries of what can be achieved.

With the fintech downturn reducing some of the competitive pressure on the big banks, many seem to have reverted to safe and expensive rather than innovative and actionable. These institutions have swooped in to rescue the likes of Silicon Valley Bank and replace Tech Nation, and they’ve proven their worth with stability and size. While the fintech industry has faltered, the older players have reminded us who has the muscle to make an impact.

At the same time, this is probably not an existential crisis for fintech. While important, the industry is regrouping and starting to deliver ideas that reshape financial outcomes for people, not just their digital experiences.

There is also a huge opportunity for fintech to join the movement to create a more sustainable world. After all, economic empowerment is fundamental for the world to change its ways more sustainably.

The fintech industry has a choice to take, stand up, lead that movement or be content with the middle age and irrelevance that is to come.