The UK is the world’s fastest growing FinTech investment region, and home to some of the most innovative, ambitious companies in the sector. So, what exactly is a FinTech business? The definition around this can be quite unclear, but roughly speaking, it’s any business that uses technology to improve or deliver a financial service of any kind.
FinTech businesses are a range of different organisations, from entrepreneurial start-ups, to global superpowers. Among those UK firms to watch in 2017 for example, you’ll find the likes of LendInvest, a property lending and investment business with backing of $58.6m, Nutmeg, an investment portfolio platform and Currency Cloud, a $35m equity-backed business specialising in foreign exchange brokering.
The growth in these types of services across the world, and especially here in the UK, is firmly on the up. Global financial tech investment increased from $930m in 2008 to a massive $12b by early 2015 as investors realised the potential for technology to supply financial services faster and at lower costs and creating innovative new solutions that make traditional services obsolete.
London is renowned as the FinTech capital of the world, and hoping to remain that way despite the BREXIT vote, with New York and Berlin following hot on its heels. Then there are regions like China, India, and Asia that reported their highest levels of FinTech investment in 2016.
Interestingly, despite being one of the largest global markets and despite the huge rise in Financial Technology, Financial Services as a business area, is still mostly offline, but this is set to change.
Some of the real boom areas within Financial Technology are:
> Digital currency – Bitcoin being the most notable. Any early adopter of Bitcoin would be mega rich now, with reports that anyone who invested $100 7 years ago would now have $75m in the bank today.
> Blockchain – the technology built to manage and secure trades, ownership, and trust without the need for a middleman. R3, Blockchain’s own consortium has just received a $107 investment from major businesses like HSBC.
> Crowdfunding – used as a way of raising investment from a mass of individuals online, and featuring companies like Crowdcube, Seedrs and Syndicate Room.
> Peer-to-peer borrowing – businesses like Zopa, Ratesetter and Funding Circle enable lenders to be matched to borrowers directly, online.
> Payments – there are a multitude of payment systems already used to settle financial transactions across the equity, bond, currency, futures, derivative and options markets. It’s also used to transfer funds between financial institutions.
The technology created by innovative businesses in the FinTech sector has already disrupted traditional ways of working in banking and finance but there are still huge strides being made in the space.
We’ve already seen a huge rise in FinTech services across the globe with applications that manage mobile payments, online money transfers, loans, fundraising and asset management all now part and parcel of day-to-day life for many of us, accessed at the touch of a button from a PC or mobile device.
FinTech businesses look set to continue to develop the next wave of services augmented with advances in Artificial Intelligence (AI) and machine learning to deliver more intelligent, advanced solutions.
AI and machine learning have the power to revolutionise the way we work but they don’t always get things right. The infamous 2013 tweet sent from the hacked Associated Press account falsely reporting a terrorist attack on the White House is just one example of the power AI has to get things a little wrong.
Keywords within the malicious tweet were picked up by the ‘advanced’ algorithms running high frequency trading systems and underpinning the financial markets, which reacted programmatically to the news of the terrorist attack, resulting in a £108.5b cost to the market.
This highlights the power, scope and intelligence of machines, but also puts a spotlight on how much we trust computers to make big decisions for us and what can happen if mistakes are made.
FinTech is a sector that’s developed massively in the last few years, and it looks likely to grow significantly over the years to come, having an even greater impact and causing even more disruption in one of the world’s most traditional and powerful industries.
FinTech is a fast-moving and dynamic sector, even within the technology industry, and has some truly innovative UK-based businesses at the vanguard of its success.
The UK financial services sector is one of the largest globally and its FinTech community is thriving. The rise in accelerator and incubator schemes, and the continued support from both the FinTech industry body, Innovate Finance, as well as UK regulator, the Financial Conduct Authority (FCA) are evidence of this. It is these factors, along with our nation’s long history of innovation, that places the UK at the centre of the global FinTech market.
As Secura's CTO, Dan is responsible for the team that design, build and maintain our cutting edge cloud hosting infrastructure. He is also the dishwasher police - stack it or else.
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