Despite the continued uncertainties of Brexit, 2018 was another year for the UK’s fintech sector.
Record levels of investment poured into the community, with $16bn secured in the first six months of 2018, exceeding the value of investment in US fintech by almost $2bn.
In addition, progressive regulation and a thriving financial services sector attracted more entrepreneurs from around the world. According to EY, the UK is home to 1,600 fintech companies, with over 80 per cent based in London – creating a true global fintech capital.
Concurrently, the increased adoption of the open banking standard levelled the retail playing field for fintechs, giving the end customer greater control over their data.
The listing of the Argo Blockchain – the first ever crypto firm on the main market of the London Stock Exchange – and the IPO of peer-to-peer lender Funding Circle were big achievements.
And finally, two British billion-dollar unicorns were anointed: the no-fee currency exchange app provider Revolut, and trendy challenger bank Monzo.
So with these major milestones behind us, what can we expect in 2019? I asked founders, chief executives, and experts in the industry, to find out what they predict for the future of fintech.
Open Banking will come into its own
Christoph Rieche, co-founder and chief executive of SME lender iwoca, says: “After its disappointing introduction this year, we expect a host of Open Banking apps to launch and go viral among consumers, thanks to the potential to save them thousands of pounds.”
Back-end innovation is the new cool
“Adoption of new platforms is growing at record speed, while legacy back-end technology continues to power new solutions. We don’t expect to see that momentum stop,” predicts Vinoth Jayakumar, investment director at European Venture Capital fund Draper Esprit, with confidence.
“What we do expect is a shift in focus as new fintechs and old institutions start to think through back-end infrastructure problems. Fraud, core banking systems, and real-time payments are non-sexy topics that present real challenges for incumbents and real opportunities for entrepreneurs.”
It’s all about talent
“Skill shortages will increase as more people are put off from coming here with Brexit,” says Evgeny Shadchnev, chief executive of coding bootcamp Makers. “Greater focus will therefore be placed on home-grown talent. Expect more businesses to tap into the UK government apprenticeship programme to train fintech workers.”
However, Marieke Flament, managing director of the crypto firm Circle, is rather more optimistic about skills and growth in the digital currency space.
“We’ll see a few key things in 2019: more regulatory clarity, more talent and capital flowing into the industry, and more use cases. All of this will bring us closer to the ‘Tokenisation of Everything’.”
Industries to converge
Another hot topic in 2018 has been the ailing UK high street. Could fintechs be part of the solution? Michael Rolph, chief executive of mobile payments app Yoyo Wallet, believes that they will play a bigger role in driving the elusive omni-channel experience.
“Research has shown that consumers are happy to share their purchase preference data in exchange for rewards, deals and offers that are personalised to them. Fintech enables retailers to harness and make the most of the power of this data.”
Traditional incumbents should be very worried
“Learning from the success of top European fintech hubs, progressive regulations in the US will produce a fertile market for expansion and new entrants,” warns Shachar Bialick, chief executive of all-in-one card company Curve.
This will force more large incumbents to adapt and protect their market share or risk being transformed into zombie record holders used solely for opening accounts with challenger banks.
Meanwhile, Michael Kent, chief executive of digital money transfer service Azimo, is anticipating global expansion and big tech’s foray into fintech.
“Driven by both growing ambition and post-Brexit business necessity, UK fintech will push beyond the EU to become much more global. Expect to see more from the Faangs (Facebook, Apple, Amazon, Netflix and Google) as they move from retail and advertising dominance onto the new battleground for customers: their money.”
Artificial intelligence and big data will dominate
“The ability for organisations to execute and adopt AI strategies will determine their success in 2019 and beyond,” predicts Dr Stephen Christie, chief executive of behaviour analytics firm Neural Insights.
“Despite concerns over data privacy, bias and security, AI has emerged as the primary transformation tool in the digital age, and that’s not going to change – especially if it solves real business problems.”
With chaos in Westminster and Brexit dominating the news agenda, isn’t it refreshing to see that the UK fintech industry will continue to be the leading light on the global stage? Something to feel good about in these tumultuous times.