Does the United Kingdom’s fintech sector need a helping hand? At first glance, the answer to that question would appear to be a resounding no. According to figures published last month by Dealroom and HSBC Innovation Banking, Britain’s financial technology startups and scaleups attracted $3.9 billion in investment in 2024, retaking the pole position from climate tech. However, according to Innovate Finance – an organisation established to “accelerate Britain’s leading role in financial services” – there are a number of factors hampering the progress of Britain’s fintechs.If success is measured by equity investment, then the U.K. continues to dominate Europe’s evolving financial technology sector. However, as Innovate Finance CEO Janine Hirt is keen to point out, rival hubs have not been resting on their laurels and the U.K. should not take its preeminent position for granted.
“We are in a good place,” she says. “However, where the UK used to be ahead of most of Europe combined, we are now only ahead of the next five hubs. There are other hubs that are progressing at a faster pace.”
Should that be a cause for concern? Yes, boosted by a deep well of expertise in the City of London financial center and a relatively light touch approach to regulation, the U.K’s fintech sector was an early innovation economy success story but it doesn’t exist in a vacuum. Hubs such as Berlin, Paris, Stockholm and Vilnius have their own momentum so it seems natural that the tectonic plates of investment will move around a little. I put it to Hirt that as the number one destination for VC cash, London doesn’t have much to complain or worry about.
A Fall In Investment
As she sees it any relative decline in the U.K’s attractiveness to investors should not be something that is simply accepted.
“We have got an ecosystem where there are more unicorns than anywhere else in Europe,” she says. “And we have a government that is committed to supporting fintech through the Financial Services Growth Strategy.”
In practice, that means the UK government has identified financial services as a key driver of growth and is currently seeking industry input. A report on what the strategy actually is is due to be published in the spring.
In the meantime, Hirt sees no reason why the value of Britain’s fintech companies shouldn’t return to a position where it is greater than the rest of Europe combined. As it is, however, investment has fallen. “We were down 30% last year – that’s a greater decline than in the rest of the world and other hubs are catching up.”
Support For Challenger Banks
So what can be done? Well, Innovate Finance is making a number of suggestions, including more support for challenger banks. These have been the consumer-facing poster children for U.K.-based fintech but Hirt says the new generation of banks face a number of challenges. She cites the example of Authorised Push Payment fraud.
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