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Why London’s Fintech Scene is Largely Unfazed by Brexit

As the host of this year’s Sibos conference, London is ready to be in the world’s spotlight. While the UK’s parliament may be in deadlock, the capital’s vibrant fintech scene has all the right ingredients to shine, writes Nils Behling, Co-Founder of Tradeteq.

Nils Behling

From September 23 to 26, London’s ExCel Centre will play host to 9,000 business leaders, 600 speakers, over 200 exhibitors and 100 fintechs, all ready to exchange ideas and opportunities for the future of the financial services sector. 

Sibos was first held in 1978 in Brussels, and in its 41-year history, this will be the very first time it visits the UK’s capital. 

At first glance, the timing may seem strange, given the UK and its financial sector are grappling with the political and economic uncertainty, prompted by the government’s failure to agree the optimal approach for leaving the European Union. 

The irony of the situation is while the UK’s parliament may be in deadlock, its fintech sector is more vibrant and resilient than ever before.

Fintechs employ 76,500 people across the UK, and this number is expected to reach 105,500 by 2030.

Fintech investment reaches new heights

Since 2016, investment in UK fintechs has repeatedly surpassed that of their European peers. It jumped by 153% in 2017, reaching over USD 1.6 billion. In 2018, private equity and venture capital funds poured another USD 3.3 billion into the sector — 56% of the total value invested in Europe.

Fintechs employ 76,500 people across the UK, and this number is expected to reach 105,500 by 2030. This tremendous growth beat the expectations of economists and commentators, and proves that London’s fintech scene is shining brighter than ever before.

So what makes the UK capital so attractive in terms of financial technology? For one, the strength and expertise of its financial sector is hard to surpass. 

With its convenient time zone, access to talent and business-friendly regulations, the UK was the world’s top exporter of financial services, generating an industry trade surplus of about US$88bn, according to a 2018 report by TheCityUK.

Today, the majority of fintech entrepreneurs in London come from the banking or insurance sector, harnessing years of experience and contacts within the world’s top financial firms. 

UK regulators are often considered the most receptive to fintech innovation in the world

Secondly, UK policymakers and regulators are doing everything it can to foster its fintech ecosystem. In August 2014, the then Chancellor of the Exchequer, George Osborne announced the UK’s ambition to become “the global capital of fintech”. True to its word, the government subsequently made policy adjustments to attract both talent and capital. 

UK regulators are often considered the most receptive to fintech innovation in the world, and it’s easy to see why. In 2016, the Financial Conduct Authority launched a fintech sandbox to test innovative financial products and services. 

The EU’s Open Banking initiative, which was introduced in January 2018, was led by the UK’s Competition and Markets Authority, making it much easier for customers to share their financial information with challenger banks and other fintechs. 

In May 2019, the UK’s Treasury and Department of International Trade produced the UK’s Fintech: State of the Nation report to promote the current state of the sector, inform stakeholders about trade and investment opportunities and demonstrate the UK’s attractiveness as a fintech destination. 

It set out the basis for why global entrepreneurs should set up their next fintech venture in the UK, and why investors should choose a UK-based fintech firm for their next major investment. With 82% of incumbents expected to increase fintech partnerships in the next three to five years, the reasons for participating are compelling.

Finally, the UK population is extremely digital savvy. Driven by its millennial generation, people are hungry for new technologies and very quick to adopt them. This makes London an ideal base for entrepreneurs to set up, test and grow their fintech solutions. 

A centre of trade and commerce 

For all these reasons, the UK’s capital is an obvious choice for fintech entrepreneurs wondering where to set their headquarters. For Tradeteq, the argument was made even stronger by the fact that London also has a long history as a trade hub and is a global centre for trade finance. 

Access to trade finance and banking expertise, a deep and highly diverse talent pool of technologists and data scientists, and continuous innovation coming out of the capital’s fintech sector is exactly what Tradeteq needed to develop a technological solution for trade finance distribution. 

With 82% of incumbents expected to increase fintech partnerships in the next three to five years, the reasons for participating are compelling.

Two years since we set up, the decision to base the company in London has brought many benefits, including the opportunity to partner with the University of Oxford’s Computer Science department, provide regularly consulting to banks and investors, and partake in an industry-wide initiative to standardise the process of distributing trade finance assets and develop it into an asset class of its own. 

Yet, there is another aspect. London has traditionally been a welcoming and open destination for a global talent pool. Maintaining this openness is crucial in securing its position as the fintech destination of the future. 

London’s fintech scene is alive and thriving, and more importantly, given the right environment, it will be here to stay. This month, Sibos will showcase that the UK is still open for business, create new opportunities and highlight the city’s potential to be the global epicentre of fintech.

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