Fintech Ecosystem Packs A Punch

F

intech is London's trump card. It's where the financial might of the City collides with the tech skills of the universities and private sector. The result is the world's leading venue for fintech.

One of the best known is Starling bank. Anne Boden, a financial services veteran, recognised the potential for the technology sector to transform how people manage their finances, in a way where traditional banks were failing.

In 2014, Starling Bank was formed and armed with a small team around her, Boden’s journey of building a new app-only bank commenced. Whilst one recognisable member of that early team – Tom Blomfield – ultimately left and went on to create his own competing challenger bank, Monzo, the early years in their London office paved the way for Starling’s future success. Today it has raised £363 million and a string of high-profile TV adverts and successful London Underground campaigns means it proudly boasts 1.9 million loyal customers.

And how has London contributed to their success? It’s by having an enviable ecosystem that allows the finance and tech sectors to work in harmony together, side by side. Boden has benefited from that and says: “In London, you have them both coming together and a vibrant community here, as well as a very supportive regulator.” Nowhere is this more true than London.

Across the city, every financial activity is being disrupted by fintechs. Insurance, wealth management, personal investing, lending, payments...it's all up for grabs and all being changed by London-based firms. In fact, between 2014 and 2018 London's fintech sector received more than five times the investment of any other European city. That's more venture capital than Paris, Frankfurt, Berlin and Amsterdam combined.

A key reason is the regulator's ability to both invigilate, and foster innovation. The Financial Conduct Authority runs a sandbox – an experimental environment to test new ideas. To date more than 700 companies have been helped, accelerating time to market by 40 per cent. For example, London headquartered bitcoin firm Luno – which was acquired in September 2020 by Digital Currency Group – used the FCA's sandbox to evaluate ideas with regulatory supervision and advice. It means disruptive firms can explore the limits of the law, without developing concepts that are going to be vetoed further down the line.

The winner, of course, is the consumer. Andrew Bailey, the former Chief Executive of the FCA, said at the recent annual public meeting : “Innovation offers huge opportunities for consumer good – our Sandbox is a testament to that”. Londoners are reaping the rewards by having access to next-generation financial services. The average person on the street is starting to see the impact of advancements on their ability to manage their banking, including payments and investments which might be held by different providers, from a single app.

According to a survey of more than 2,000 people at the height of the coronavirus pandemic, 66% of people were regularly using financial technology between March and July 2020 – this is an increase of over 50% compared to 2019’s usage figures. Naturally, the rest of the world will one day enjoy the same benefits. But right now, it's Londoners who get to enjoy the products they helped to develop.