Fintech growth in the UK
The Fintech industry has quickly grown in the UK, as the country aims to establish itself as a referential financial hub and global market leader.
After the United States, the United Kingdom is the second-highest country in global Fintech rankings. The capital city boasts of the world’s highest concentration of financial and professional service firms with 64,000 offices and counting.
According to a 2019 report, published by the UK government, there are currently over 1,600 Fintech firms in the nation, a figure which is estimated to double by 2030. The Fintech adoption rate in the UK (42%) is also well above the global average of (33%).
It’s not just the British businesses who are embracing Fintech services, it’s the British population too. Brits are increasingly embracing new financial services, and many might not even know the impact Fintech has on their day to day life.
One in four British nationals now have a digital-only bank account and more than two-thirds of Brits claim to be interested in the future of Fintech. The future of the industry looks promising, as consumers demand more technological services to manage their money.
What are the differences between Fintech and traditional banks?
Although businesses in the Fintech industry and traditional banks share many similarities, the two are ultimately built with different values and organisational structures.
Banks have been around for centuries and since their creation, their organisational structure has been unaltered. The banking system is rigid, and its rules or regulations are challenging.
Fintech is a relatively new sector that encourages innovation and relies on technological advancements to improve its services. Unlike traditional banks, many Fintech services are modular, personalised, and accessible.
Target market is another point of contrast between Fintechs and traditional banking institutions. Fintech companies target individuals who have limited access to financial services. They attract the businesses and individuals deemed as “unbankable” by traditional banking, such as those with low credit ratings or limited funds.
For example, blockchain and cryptocurrency aim to democratise money and give people access to their finances at a reduced cost. Buy now and pay later services aim to attract customers with less spending power and provide them with buying opportunities. Similarly, invoice finance services allow small businesses, with limited credit quality, the opportunity to access funding and grow their business.
On the other hand, banks tend to target customers or businesses that have a proven track record, high credit scores and ratings, extensive re-payment histories and more. The difference between Fintech and traditional banking is that the latter has many more barriers, requirements, and paperwork than modern Fintech services.
To access funding from a bank, you’ll need to uphold strict collateral requirements, which not all businesses can fulfil. Fintech companies are much more lenient with their requirements and they offer more personalised services than traditional financial institutions.
Overall, the two have very different focuses; banks are rooted in providing security and management of financial risk, whereas Fintech firms are focused on creating seamless customer experiences and providing next-generation services with personalised and functional features.
The Fintech focus is much broader and companies in the sector are always looking to adapt their services to fit societal needs. Contrastingly, banks have a narrow focus and therefore their market distribution is also rather limited.
Fintech investment by country
Fintech is an exciting new development because you don’t have to be the largest or most powerful country in the world to make use of this sector. Instead, you need to champion flexibility, accessibility, and innovation.
Fintech offers exciting opportunities to countries of all sizes, regions, and levels of development. Interestingly enough, eight out of the world’s top twenty financial hubs, as ranked by Findexable, aren’t featured as one of the world’s 20 largest Fintech centres.
Although international powerhouses remain near the top of the Fintech investment list, there are still some smaller countries, such as Lithuania or Estonia, ranking high. Findexable ranked the United States, the United Kingdom, Singapore, Lithuania, and Switzerland as the top five countries pioneering the Fintech movement.
The United States ranks as the strongest Fintech contender with a total of around $9.4bn Fintech investments in 2019. Payments, B2B fintech and security are the strengths of this country, with cities like New York, Los Angeles, Boston, Chicago, Seattle, and Dallas pioneering the movement.
The following country with the highest amount of Fintech is the UK, which also ranks first place within Europe, with a total of $2.29bn worth of investment. The UK’s Fintech sector is heavily concentrated with blockchain, challenger banks, personal finance and wealth lending. Companies like Transferwise, Greensill and the BGL Group are some of the most notable leaders in the sector.
The dark horse in the list is obviously Lithuania, a country that has adopted progressive regulation and prioritised the entrance of Fintech firms into their domestic market. Lithuania ranks fourth and specialises in banking, lending, and payment services with firms like Coingate and Neo Finance taking the lead. The country has also become an attractive option for Fintech companies who want to establish themselves in the European Union post-Brexit.
However, Fintech is quickly revolutionising the way we interact with financial services in almost every region, not just those areas with the highest investments per capita. Regions like the Middle East where access to financial services remains limited can benefit immensely from the power of Fintech.
In Africa, a large majority of the population doesn’t have access to a bank account, but many individuals have phones. Startups like M-Pesa have sought out to facilitate the transfer of funds in the region and developed a mobile app. This allows people to pay with their smartphones and even withdraw cash from kiosks.
Fintech is an industry constantly striving to streamline procedures, improve day-to-day services, and find innovative solutions to problems. The sector prides itself on being less about competitiveness and more about collaboration.
It’s a sector that uses new financial technology to tweak traditional banking services. The sector is proving to be very lucrative, and now fintech events, conferences and showcases are hosted all across the globe.
Some of the most worthwhile events in the industry include the Fintech Forum in Paris, Consensus in New York, the Swell conference in London, The Montgomery Summit in California, and Finovate Europe in Berlin.
Invoice financing Fintech
Invoice financing is a Fintech service because it uses technology to make financial services more accessible and convenient for businesses of all sizes and sectors. Companies can make use of invoice financing and increase the liquidity of their cash flow to compensate for late-payment issues.
This finance facility helps companies gain instant access to working capital by facilitating the sale of outstanding invoices. Factoring companies buy unpaid invoices, at a discount, and in return, they provide companies with an instant cash injection.
The difference between this fintech service and a traditional bank is that invoice financing doesn’t ask businesses for a multitude of requirements. It simplifies and streamlines the process in a way that is convenient for both parties.
Invoice financing has helped SMEs fuel growth and save time by offering a personalised and accessible financial service. Fintech firms in the invoice finance sector also use technology to scope out a buyer’s likelihood to pay outstanding invoices and help businesses overcome cash flow issues.
Sonovate’s invoice finance software combines features such as payrolls, timesheets, and contracts, all into one centralised app. If you think your business could benefit from invoice financing services, don’t hesitate to book a consultation to find out more about your options.