The fintech market around the world was valued at about $127 billion in 2018 and is estimated to grow to $310 billion at an annual growth rate of nearly 25% in the next two years. Broadening digital payments sector is the driving force for the market of financial technologies.

The UK is a worldwide pioneer in FinTech, with a top-notch and balanced ecosystem. The synthesis of financial and technical ability is unrivaled, and capital is substantial, with almost £3.6b put into FinTech in 2019. In strategy and framework, the UK has set the worldwide benchmark for system driven advancement, with key activities including the FCA’s administrative sandbox, open banking, and the AI Sector Deal often referred to as globally particular. What’s more, from an exciting point of view, purchasers, SMEs, corporations, and government are key clients of FinTech; more than 66% of careful digital customers presently take advantage of FinTech utilities.

The UK’s world driving fintech industry is enabling flexibility at a time of instability with imaginative arrangements and partnerships. The UK’s recommendation for fintech is one of a kind: world-class availability, UK-wide mastery, a forward-thinking approach to control and vicinity to an imaginative financial services segment. This perfect environment has put the UK at the cutting-edge of fintech advancement – from peer-to-peer loaning to challenger banks, blockchain, artificial intelligence, and regtech. 

Fintech is more than just a subdivision in the UK. The entire monetary services industry has grasped its advancement, conveying unused client-centric and imaginative items, services, and arrangements. The UK is taking the prominence – whether typically regtech, installments, counterfeit insights, or tech for significant innovations.

Let us have a look at some UK companies, and you will see the size of the market to a sense:

  1.    OakNorth Bank. Funds raised: £637m. Founded: July 2013.
  2.    Revolut. Funds raised: £627m.
  3.    Atom. Funds raised: £482m.
  4.    Paymentsense. Funds raised: £329m.
  5.    Monzo. Funds raised: £324m. 
  6.    WorldRemit. Funds raised: £311m.
  7.    TransferWise. Funds raised: £305m.  
  8.    SumUp. Funds raised: £304m.

Whether you are in the fintech industry or not, you probably heard those companies, at least some of them. However, why is the UK leading the fintech industry, what are the main reasons for all those successful companies located in the UK?

Why Is The United Kingdom an Excellent Place for The Fintech Industry?

Global Funding 

Half of the financial technology funding came from overseas, mostly from North America (25%) and Europe (18%) two years ago.

World-Class Target For Investors

The UK is in second place after the US in financial technology investments. Only the United States takes more financial technology investment than the UK.

Prosperous Tech Sector 

The greater tech sector got $6.3bn of VC funding.

We can see that it is no surprise that the City of London and Financial Conduct Authority launches the Digital Sandbox Pilot to support fintech companies and the fintech industry.

The Digital Sandbox Pilot provides a development, testing, and validation environment for early-stage fintech startups and other large fintech companies; the system provides realistic data sets to set a scene that is prone to happen in real life. The tactical partnership between City of London and Financial Conduct Authority will see both organizations work collaboratively to improve and start the digital sandbox environment to support new firms via giving access to data sets which are high in quality and real-like sets to test and validate with the technological methods.

In its early stage, the digital sandbox will provide startups and great financial institutions and SMEs looking to play a crucial role in the recovery from COVID-19 Pandemic via providing relevant data sets and expertise in the branches of detecting and preventing scam and frauds, supporting vulnerable customers, and improving access to finance for small companies financially affected by the COVID-19.

The pilot’s launch represents a further stage of the FCA’s long time encouraging and supporting innovation in financial services through Innovate, and the TechSprint programs.

Financial Conduct Authority Chief Executive Woolard said: ‘Innovation is a powerful tool of effective competition and can help hasten the development of newer solutions to emerging challenges. We wait impatiently to work with the City of London on this crucial initiative.’

The Digital Sandbox pilot is targeted at trialing this environment via supporting the products and services which are at an early stage of development. 

Digital sandbox pilot includes the properties as the fundamentals of a digital sandbox:

  • Access to artificial data sets to enable testing, training, and authentication of technology solutions.
  • Marketplace of API in which digital service suppliers list and provide access to services via them.
  • Development environment where contributors may develop and test their improvements and methods.
  • Collaboration platform that facilitates an environment of vital organizations which provide reinforcements and input to digital sandbox contributors, for instance, academia, government institutions, VCs, and charity organizations.
  • Observation platform for flight experiments from a technical point of view, nurturing policy thinking in a secure habitat.

As a result, due to the COVID-19 pandemic, many companies struggle, and fintech companies are not exceptional in this situation. This year, many problems have occurred like fraud, cyber attacks and financial crisis. The UK wants to solve these problems and support innovation through the sandbox, and bring the industry where it was before. I hope you enjoyed the article; here are the references and further reading below.

References and Further Reading

  7. KPMG Fintech Report 2020