London’s Emergence as a Fintech Location
In the early days of fintech, much was made of the potential of start-ups to disrupt the retail banking industry winning over customers on the virtue of improved user experience and capitalising on a decline in levels of confidence in banks following the Global Financial Crisis (GFC). London proved to be a remarkably fertile ecosystem for the emerging sector on account of three major factors: talent, regulation, and funding.
All tech start-ups require capital, but none so much as fintech start-ups, particularly those in the lending space. While the UK may have relatively low liquidity in comparison to China and the US, it does boast a strong funding ecosystem, with most activity concentrated in London and the South East.
The capital has long been Europe’s top venture capital hub and over the past two years the UK has almost attracted twice as much VC than France, its closest rival in terms of tech funding2.
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Global Analysis of Investments in Fintech
Corporate VC investment in fintech for 2018 of $23.1 billion nearly doubled the previous high of $11.6 billion seen in 2016, with the number of corporate fintech deals growing for the eighth successive year. Increasing corporate participation highlights fintech going mainstream as well as a competitive response to the emerging threat of Fintech companies that have scaled, with both traditional financial institutions and a broad range of companies outside of the financial services industry participating through investments and acquisitions, including some of the world’s largest technology companies and payment platforms.
The growing maturity of the sector has also led some more advanced fintechs to make their own investments as part of their drive to expand either geographically or on a product basis and in some cases, partnering with/taking investment from financial services incumbents. There is expanding interest in partnering with fintechs to provide services, in addition to increasing interest from corporates with homegrown fintech offerings to provide B2B services to corporate clients and other financial institutions (e.g. Open banking, regtech, cyber, etc.).
