The King is Dead! Long live the King?

Innovate Finance have just released data that shows globally, investment in fintech continues to go from strength to strength. The aggregate value of global fintech investment surged up 27% year on year to $15.2billion in the nine month period up to Q3.  However, the picture in the UK is less rosy.  Innovate Finance's data indicates that over that same period, the aggregate value of investment in UK fintech companies has dropped 26% to $532million, with a pronounced downturn in the run up to the EU referendum and subsequently. 

Given that the only certainty at the moment is that "Brexit means Brexit", it is no surprise that investors are thinking twice before committing capital to UK fintech.  The UK, and London in particular, has long been held up as the blueprint to create a vibrant and dynamic fintech hub.  The confluence of access to talent, capital, customers and the support of a progressive and innovative regulator came together in a manner not seen elsewhere in the world.  And then the world changed.

Where once London (or possibly New York) was seen as the natural destination for ambitious fintech entrepreneurs, other cities and countries are now pushing as hard as they can to attract the very best and brightest to them.  For example both Berlin and Frankfurt are striving to be seen as the fintech capital of Germany – Berlin with its thriving creative and digital scene is home to many B2C start-ups; Frankfurt as the home of German banking and the BaFin leans more towards B2B start-ups.   

I have just come back from Euro Finance Tech (part of Euro Finance Week in Frankfurt) where I saw first-hand just how the fintech ecosystem in Frankfurt is exploding into life.  During a very lively panel debate with investors and entrepreneurs, I made the case that the underlying fundamentals for coming to the UK to build a great fintech business remain very strong – ultimately nowhere else offers the same combination of attributes that make the UK such a vibrant place for fintech.  But the case being made by both Frankfurt and Berlin, and other hubs around the globe, is growing. 

Given the importance of financial services to the UK economy, supporting fintech needs to be a key part of the Government's approach to the Brexit negotiations as articulated in Innovate Finance's recent submission ahead of the Autumn Statement.  But irrespective of whether Brexit turns out to be hard or soft (or somewhere in-between), the fact that the FCA continues to lead the way in terms of its approach to regulation in this sector means that UK based fintech companies will be able to adapt their business model to meet the local regulatory requirements to serve customers across the globe (not just those in the EU).

UK fintech remains very much alive and I don't see anyone taking the UK's crown any time soon.

To view The Q3 2016 FinTech Investment Landscape the figures as published by Innovate Finance on 16th November in full click here.

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