London's billion dollar fintech scene
London’s booming fintech scene has raised $5.4bn over five years
London’s financial reputation coupled with a thriving technology scene has transformed the capital into a hub of digital innovation.
New research from IC Dowson William Garrity Associates shows over the last five years (January 2010 until June 2015) global fintech investment – including institutional debt financing provided to P2P platforms – hit $49.7bn. The UK has raised more than 10% ($5.4bn) of this figure, with the majority going directly to London ($4.5bn).
The analysis mark Britain as European leader of the fintech industry, as the continent’s combined direct investments for the same duration has pulled in $4.4bn. Elsewhere China has secured $3.5bn over the five years, and India $2.2bn.
While the US has received the lion’s share of direct investment ($31.6bn over the same period), William Garrity’s report shows the total value of fintech deals – including direct investment, plus listed companies, and acquisitions – in London topped $18.4bn. This figure includes the capital’s aforementioned $4.5bn, contributing to the UK’s total investment figure ($5.4bn) from January 2010 until June 2015.
Interestingly, Silicon Valley has secured only $200m more than London in terms of deals, with $18.6bn of investment flowing to the region over the same period.
IC Dowson William Garrity Associates report clearly demonstrates that London is a world leader of the fintech industry. The City’s unique access to talent and strategic geographical position, in terms of middling the Asian and American time zones, are proving especially relevant to international investors.
Presently there are 44, 000 people working across London’s fintech scene – which is more than New York or Silicone Valley – and more than 150,000 digital tech professionals.
Alongside a solid workforce, the City’s 250 foreign banks and diverse population have increased demand for economic efficacy: Apps, peer-to-peer lending models, and open source software are enabling simple ways to manage complex financial situations.
Yet simpler payment methods are in abundance. Research from MasterCard has found a 560% increase in contactless payments for the twelve months prior to August 2015. This is compared to the 373% increase for the twelve months to July 2014.
Rapid adaptation levels in this sector are creating opportunities for digital security firms, as data security remains a key concern for contactless card holders.
However the financial technology sector is not exclusive to established banks nor small firms. It is a melting pot of financial interests, all of which contribute in some way to the sharing economy.
This platform is powered by consumer behaviour and the distribution of services at a low cost, but with a social emphasis. The sharing economy is integral to public adaptation of fintech, with digital infrastructures such as the Cloud and mobile devices playing vital parts.
Banks like Barclays are already capitalising on this ethos. Fin tech accelerator programmes, coordinated in conjunction with startups like TechSrtars, help to develop the next generation of fintech entrepreneurs. But just like any other industry, innovative banking products will fail to exist without cash injections and an operable legal climate.
Luckily for London, these conditions are being met. In the first six months of 2015 the capital’s fin tech companies had raised $1.5bn worth of venture capital investment. This figure, according to London and Partners, eclipses the same period in 2014, when just more than $1bn had been raised.
In addition British regulators, especially the Financial Conduct Authority’s Innovation Hub, are self-styled supporters of fin tech. This position has been mirrored by Chancellor of the Exchequer George Osborne who, during the Innovation Hub’s launch in 2014, referenced ‘the right tax system and appropriate regulatory rules’ as paramount to the industry’s success.
Moreover Britain’s fintech industry generated £20bn in revenue by the end of 2014. It demonstrates that interconnectivity in London, whether that is in terms of moving around the city, skills or digital infrastructure, is a key pull for investors.