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UK Fintech News: 2023 Year in Review

Every Wednesday, we delve into the latest fintech updates from across the UK. Now, as we approach 2024, we take a look back on some of our highlights and important fintech moments from across the last year in the UK. 

Maybe UK tech and politics don’t mix?

While the UK fintech sector looked to tackle the difficult funding landscape, amidst high interest rates, we saw a number of governmental actions – both positive and negative.

Kicking things off, Chancellor of the Exchequer Jeremy Hunt outlined plans to boost the UK government and make the country the “world’s next Silicon Valley” in a speech on 27 January. As part of his spring budget, Hunt revealed plans to deliver 12 new investment zones across England – with at least one in each of Scotland, Wales and Northern Ireland.

However, in March, Hunt announced plans to slash energy support package for businesses – worth £18billion over six months – to just £5.5billion for the 12 months from April 2023.

In the same month, Pensions Minister Laura Trott initiated a ‘reset’ of the Pensions Dashboard Programme, after revealing that more time is needed beyond the original deadline of 31 August 2023. The reset saw a new chair of the programme board develop a new plan for its delivery.

In October, the Cabinet Office announced that up to 2,500 ambitious tech talents will be recruited into digital roles in government by June 2025 through new apprenticeship and early talent programmes.

Is Consumer Duty taking the 2023 crown?

On a more positive note, after much anticipation, the Financial Conduct Authority‘s (FCA) Consumer Duty officially launched on 31 July. Looking to ensure a better standard for consumer protection, the new rules were met with mostly positive feedback – from companies and consumers alike.

Some concerns remained over whether the government could provide enough support to firms to ensure they can completely comply with the new regulations and ensure customers are kept safe.

Chris Kneen, managing director of UK & Ireland at Provenir, the AI-powered credit risk decisioning platform, explained the significance of the rules for financial firms: “For financial institutions, it’s a complete mindset shift – they want to be seen as looking after their customers, not as loan predators. Reputational damage can be caused quickly, and the impact of rumours and a bad reputation could easily tank their business.”

Launching the FinTech Growth Fund

In August, UK FinTech Growth Partners launched the FinTech Growth Fund, an investment fund focusing on supporting growth-stage fintechs as they scale.

The initiative, which garnered immediate support from Barclays, NatWest, Mastercard, London Stock Exchange Group and Peel Hunt, is hoping to transform the fintech landscape in the UK by supporting growth-stage fintech firms in their scaling endeavours.

Committing between £10million and £100million, the fund plans to execute an average of four to eight investments annually. Beyond just capital, the fund offers strategic guidance, enabling its portfolio companies to tap into a reservoir of expertise spanning fintech, venture capital, and broader financial services.

The conception of the fintech fund was inspired by the pivotal Kalifa Review, which suggested a strategic five-point blueprint to solidify the UK’s global dominance in financial services. The review pinpointed an annual £2billion funding shortfall for growth-stage fintechs and endorsed a £1billion growth fund to address this gap.

Sir Ron Kalifa, the mastermind behind the Kalifa Review, expressed his enthusiasm for the fund. He commented: ” The Fund represents another key building block in the support ecosystem for growth stage UK fintech businesses. This is an important step forward towards ensuring the UK retains its leadership role in fintech.”

Banking drama

In March, Silicon Valley Bank UK (SVB UK) entered insolvency, after its parent company collapsed and was taken over by US regulators. At the time, the UK government explained that it was “working at pace” on a solution to avoid or minimise damage to some of the UK’s “most promising companies”.

Indeed, shortly after, HSBC acquired SVB UK for £1, following the US Bank’s closure by regulators. The Bank of England and HM Treasury facilitated the transaction using powers granted by the Banking Act 2009.

At the end of July, the banking world was shaken by more news: Alison Rose departed from her position as chief executive of NatWest Group. She stood down after a row over the closure of Nigel Farage’s bank accounts with the private bank Coutts, which is owned by NatWest.

In December, the Information Commissioner’s Office (ICO) issued Bank of Ireland UK with a reprimand for mistakes made on over 3,000 customer credit profiles. Bank of Ireland UK sent incorrect outstanding balances on 3,284 customers’ loan accounts to credit reference agencies, organisations that help lenders decide whether to approve financial products – which could have led to customers being unfairly refused credit for mortgages, credit cards or loans, or granted too much credit on products they were potentially unable to afford.

Tech Nation: Lows and Highs

In 2022, 99.2 per cent of all businesses in the UK were SMEs. With so much drama occurring in the banking world, paired with the pressure caused by difficult macroeconomic conditions, many fintech startups in the UK recognised that 2023 would be an uphill battle early on.

In February, things were made no easier when Tech Nation, the government-backed incubator for tech companies based in the UK, announced plans to permanently close after serving the industry for over a decade.

It explained that it would close its doors for good after 31 March 2023; following its government’s Digital Growth Grant being pulled – in favour of Barclays Bank‘s own incubator: Barclays Eagle Labs.

However, October saw some welcome news as Tech Nation relaunched, working with the government to act as an independent voice for founders.

Cost of living woes

Throughout 2023, the cost of living crisis also continued to dominate attention and headlines across the UK.

February saw over eight million eligible benefits claimants in the UK receive a first £299 ‘cost of living payment’. The means-tested cost of living payments were introduced to support those most at risk in the UK, with the final payment set to hit bank accounts in February 2024.

Despite all the doom and gloom, the UK saw inflation fall to 3.9 per cent at the end of 2023 – a significant drop from the 11.1 per cent peak seen in October 2022.

Consumers and firms, financial or not, will be hoping this trend can continue and ultimately lead to the Bank of England reducing its base interest rate in 2024, enabling more companies to get the support they need to survive and grow.

Other memorable fintech moments

Revolut, the UK-based neobank made British-Ukrainian Aid its latest new charity partner in February, supporting victims of the war in Ukraine. British-Ukrainian Aid sources and delivers first aid kits, ambulances and evacuation vehicles, portable power stations and generators, as well as medical supplies and equipment for those in need on the ground.

The number of UK companies developing plans to tackle climate change has also increased significantly in the past 12 months, according to Aviva‘s annual Climate-Ready index.

Forty-four per cent of UK companies now have a structured plan in place to reduce their carbon footprint and climate impact – up from 34 per cent one year ago.

At the end of June, Anne Boden, founder of Starling Bank, stepped aside as CEO, following nine years at the helm. Her announcement coincided with Starling’s record pre-tax profit of £195million, a six-fold increase on the previous year. Starling also achieved revenue of £453million for the year to 31 March 2023, more than double the previous year’s figure of £216million.

November saw some rare positive fintech news as Allica Bank emerged as the fastest-growing UK fintech in history, according to Deloitte’s UK Technology Fast 50 awards, which ranked technology companies based on their revenue growth over the past three years.

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