Fintech CEO Janine Hirt on why London is still the place to be

Fintech founders and venture capitalists are not known for their pessimism.

The sector rode a wave of good vibes for a decade as funding poured in, new firms emerged and politicians hailed it as the shining jewel in Britain’s financial services crown.

Then-Chancellor Rishi Sunak put something like the icing on the cake last year when he threw his full support behind making the UK a hub for digital assets.

But that optimism has faded somewhat. The industry has been rocked by the economic downturn of the past 12 months, and the ripple effects of rapid interest rate hikes have hit fintech as hard as any sector.

When the great and the good of the global industry gather next week for the ninth annual Innovate Finance Global Summit, for the first time in a long time they will be forced to contend with an unknown tremor of doubt and uncertainty.

Still, the head of fintech industry body Innovate Finance Janine Hirt is unfazed.

“I actually think there’s an opportunity here for fintech to really lead the way in how we want our financial services to look going forward, and to make sure that the next chapter of financial services looks the way we want it to,” she says. By AM

“Fintech has a very important role in driving the more positive chapter.”

Continental fintech threats

The more positive chapter has at times looked uncertain in recent months. The collapse of Silicon Valley Bank and its UK arm sparked fears of a wave of implosions across the sector.

It came after the sector had already been rocked by a year-long downturn in funding as sharp interest rate hikes shut out cheap money.

We have players here who are in the process of becoming essential parts of the financial system

Janine Hirt

As Hirt points out, however, the UK’s funding figures still look healthy compared to international competitors.

British fintech firms raised $12.5 billion last year – down eight per cent on the previous year, but still more than the next 13 European countries combined.

While much has been said about France smelling blood in the water and launching a state-backed offensive to knock Britain off the top spot, Hirt says there is no imminent threat.

“Many of the initiatives that are gaining attention in other European hubs are the kind of initiatives that you do very early on to support an ecosystem, like Station-F [Parisian start-up hub]for example, while in the UK we have a real maturity of our FinTech ecosystem,” she says.

“We have players here that are becoming significant parts of the financial services system that were once new players and fintechs. I think that’s the difference.”

When people talk about what’s happening in Europe, she says, it should be a “nod to the fact that we’re just at a much later stage of the game.”

Financing puzzle

Even with that superiority, solving the funding challenge remains high on the agenda for Innovate Finance and the wider fintech industry.

A familiar criticism of much of the sector is that UK institutional investors are too conservative to throw their weight behind home-grown UK start-ups. A major push is now underway, led by the Mayor of London with support from Innovate Finance, to get more pension cash channeled into Britain’s growth businesses.

In a Powerful Pension report, authored last month, Innovate Finance and the City of London called for a pooling of £50bn of pension cash to be directed at growth start-ups and fill the multi-billion dollar funding gap facing the sector.

Hirt says the debate will be ahead of next week’s summit and is crucial to ensure we don’t “rest on our laurels” as a country.

“Later growth capital investments and pension funds – that’s a very important piece of the puzzle,” she says.

Homemade success

The pensions campaign underlines a perennial question facing UK policymakers: how can we turn smart start-ups into £10bn behemoths?

Commentators have already predicted that this effort could be under threat this year. A number of big fintech and tech firms have been snapped up by bigger players, with pensions fintech Cushon snapped up by Natwest and GoHenry last week bought by US savings company Acorn.

Hirt says that the main challenge in the current conditions will be that companies can get financing to become acquirers.

“That means creating an environment here where UK firms can grow bigger and scale,” she says.

The topics on the agenda at this year’s summit point to the reality of these challenges. Hirt says there will be a real focus on M&A and helping firms navigate and manage the acquisition process.

Despite all the positivity, this will be a more cautious gathering at Gildehallen than in previous years. But Hirt and the fintech sector have a positive view of the future.