It’s easy to lose hope in times of darkness, and the past 12 months have without doubt given us our fair share of that feeling. Our truest challenge now is to remember, in the words of the poet Amanda Gorman: “There is always light. If only we’re brave enough to see it. If only we’re brave enough to be it.”
Fintech has always been brave. From artificial intelligence to biometric account authentication, the sector brought unlikely suspects together with the aim of connecting to create better impact. As our worlds increasingly merge and overlap, it continues to empower and bolster the millions who use it, delivering better financial outcomes and driving change. Creating freedom and sparking partnership, growth and competition. Being a force for good.
Last month’s Kalifa Review put fintech centre stage. With its core objectives and clearly positioned ability to support the UK’s economic recovery, people are beginning to see fintech’s incredible power of not only levelling up but also equalling out. We need more jobs and better trade alongside sustainable and inclusive ways to recover. To do this, we’ve got to be better connected. We’ve got to drive equal growth and opportunity across all pockets of society because the last thing we as a society or as an economy needs is more polarisation.
Connectivity ignites revolution and rapid co-creation. With a potential gross value added (GVA) contribution estimated at £13.7bn by 2030 and with job creation representing 70 per cent of that figure, fintech’s superpower is high-income tech-based employment. It also plays a key role in upskilling and retraining the existing workforce, meaning a fairer society for all.
For the UK, an annualised growth rate of 16 per cent versus 1.3 per cent for small to medium-sized enterprises over the past ten years shows fintech is unquestionably an engine for growth. We continue to create global category-defining fintech and are strong across the board, particularly in wealthtech and payments. Over the past 20 years, the number of fintech companies has grown to more than 2,500, with a third of all fintech firms now outside London. Across the UK we’ve identified 25 clusters of fintech activity, all at different stages of growth and development.
Analysis of the ten highest-growth clusters reveal a combination of core characteristics that serve as foundational building blocks for fintech success. It is clear financial services and technology domain expertise is strongly evident in the UK’s most established clusters. By the same token, in almost every area with high levels of financial services and tech professionals, a fintech cluster is present. There’s also a strong positive correlation between at least three colleges or universities providing science, technology, engineering and maths (STEM) talent and the number of high-growth fintech firms. While this absolutely underscores the importance of encouraging uptake in STEM subjects, we must not lose sight of those crucial skills of creativity and empathy. From start-up to global scaling, the most important aspects for growth are commercial partnerships alongside access to talent and investment.
There is no doubt fintech has revolutionised banking for good. It has brought new products and services to consumers and businesses. But as consumers and business change, so does its impact. As people deepen their care for the planet and for creating fairer, better futures, we see new products emerging to service their needs. From ethical investments to sustainable savings, the next wave of fintech will strengthen our soul as well as our wallets. It will span all industries, accelerating deeper collaboration and prosperity for all. We will see a re-organisation of the value chain, paving the way for companies from all industries to incorporate financial services into their customer journeys and offerings at the moments that matter most.
When you get this right, you’ve got an invisible and frictionless financial experience, meaning you’ve completely transformed how both customers and business engage with money. But the beauty of embedded finance is it’s not limited to financial services: you can re-imagine entire industries and create new types of products and services, from personalisation to solving energy poverty. In this sense, the best way to predict the future really is to create it.
Fintech companies, banks, insurers and tech giants will have critical decisions on the role they want to have and where and with whom they want to play. As with anything, our advice is to keep it simple. Identify the problem and fall in love with it. Connect and collaborate with clarity and intent. Offer frictionless customer journeys, new products and services, new business models, new ways of distribution. Solve the things that really matter, the things that push society forward.
Fintech wants to be part of the solution and drive better outcomes for all. Thanks to the Kalifa Review, fintech is having its well-deserved moment in the spotlight. Focused around five key topics, it makes recommendations and shows how the sector can move forward on skills and talent, funding, exports and inward investment, policy and regulation, and national connectivity. Bringing together government, industry and fintech, the UK can unleash the huge potential of the sector and provide the support needed for an effective post-pandemic recovery.
We need to continue to nurture a start-up culture while also giving high-growth firms the opportunity to become global giants and category leaders. With the Kalifa Review, we have in our hands a strategy and model for delivery, providing a unique opportunity to realise the potential of a decade of growth, innovation and talent. Now we just need to work together to rebuild and reshape finance to be better, to do better.
Let’s be the light.
This article originally appeared in the Spotlight supplement on fintech. You can download the full edition here.
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