A Census of UK FinTech firms by EY and Innovate Finance has found that the UK FinTech sector has continued to attract rising levels of investment despite global economic uncertainty, although many still see challenges ahead in finding the right talent and the levels of consumer adoption.
The 2019 UK FinTech Census, based on a study of over 224 FinTech companies and supported by Her Majesty’s Treasury, reveals that the average total investment raised by firms grew from £15m in 2017 to more than £20m in 2019 – an increase of a third (33%), despite the uncertainty surrounding Brexit.
In their next funding round, UK FinTech firms are expected to raise a total of £2.6bn, with Series A funding – the first significant round of venture capital financing – accounting for over a quarter (26%), with one-third of respondents anticipating an IPO in the next five years. As well as a capital injection though, FinTechs are looking for additional benefits from investors; more than half (54%) value access to new customers as the most important benefit; 14% cite partnership opportunities and 12% list international expansion and growth.
Next fundraising round by UK FinTechs expected to exceed £2.6bn across the industry
Finding the right digital skills, however, remains a key challenge for the industry and one that hasn’t changed much in the two years since the last Census – over half (53%) of firms this year reported recruiting suitable talent as a major challenge. Software engineering, system architecture and development was cited as the most in-demand skillset (ranked first by 52% of firms), but also the hardest to find. The second most valuable, and equally difficult to source, was data analytics and data science skills (ranked top by 19% of firms).
Many UK FinTechs are looking at home to solve this problem and build their talent base, with a number of larger FinTechs also looking further afield. Europe and Asia are the two most important regions, according to the Census results, with Asia overtaking North America as the second most popular region since the 2017 Census.
Levels of customer adoption (48%) and building partnerships with established players (37%) are also seen as significant challenges by the industry. Additional concerns for FinTechs are ensuring sufficient capital and liquidity (44%) and navigating Brexit uncertainty (42%).
FinTechs cite top three challenges as attracting suitable talent (53%), customer adoption (48%) and building partnerships with established players (37%)
At the same time, gender diversity continues to be a challenge for the sector. The gender split of the UK FinTech sector’s employee base is 70.5% male and 29.5% female (consistent with the 2017 Census results). The 2019 Census also showed that only 25% of FinTechs have at least one female co-founder.
Tom Bull, UK Head of FinTech at EY, comments:
“Despite the global economic and political uncertainty over the last couple of years, the UK FinTech sector has continued to attract impressive levels of investment, which is testament to its growth ambitions and reputation as a global leader. Looking ahead, the industry maintains a positive outlook, however challenges remain.
Persistent issues over talent are a real cause of concern and the UK Government’s talent and skills agenda is welcomed as the sector looks to secure the necessary resources to flourish. Equally, the Census makes it very clear that more needs to be done to try and redress the gender imbalance, which remains a challenge despite the efforts of Government and industry to make FinTech more diverse.”