The UK fintech sector is the top-ranking investment destination in Europe. But to sprinkle some of that magic dust over the rest of Europe’s software sectors, first we have to figure out what’s made fintech such a runaway success. Our Boardwave Live panel of fintech experts took us through their playbook for success.
Now a bonafide global centre of fintech, the UK attracted $5 billion of investment funding last year, more than the rest of Europe put together.
The UK has managed to create a melting pot of disruptive fintechs and established financial institutions - building the scene into a magnet for investment, a hotbed of new products and services, and a breeding ground for a plethora of unicorns. Our Boardwave Live panel was made up of fintech heavyweights from some of the world’s most innovative businesses: OakNorth Co-Founder Joel Perlman; Monzo Bank COO Sujata Bhatia; MoneySuperMarket NED MB Christie; and Zilch Co-Founder and CEO Philip Belamant – and they were generous enough to share their opinions on the unique set of conditions that have helped UK fintechs grow.
So what has given fintechs their secret sauce? And how can we transfer some of that magic to Europe’s other software-led sectors?
The Fintech playbook for scaling up
Forward-thinking regulatory frameworks
UK fintech has benefited from the freedom and incentivisation of forward-thinking yet robust regulatory frameworks such as the FCA sandbox – a “stable regulatory environment”, as Monzo’s Bhatia noted on our Boardwave Live panel. But outside of fintech, mid-sized software firms have received little government attention compared to Big Tech firms and buzzy venture-funded start-ups. UK fintech’s growth proved that regulatory initiatives can have a huge impact on our wider industries. Applied to our software-led industries as a whole, these could include:
→ Bigger tax allowances for research and development spending
→ Expanding talent visa schemes in order to attract and retain workers from abroad
→ Creating a unified equity market regulation and a European SEC for the development of a cohesive and robust financial market. Read the Boardwave White Paper for our full list of regulatory recommendations for encouraging software-focused industry growth.
Early adoption of disruptive technologies
Putting customers at the heart of all business decisions has been key to the success of fintechs. Rather than focusing on products or competitors, our panel agreed customers need to be at the forefront of our leaders’ thinking. “Any company betting on not having competition to be successful is not putting customer outcomes first”, said Bhatia.
To steer this mindset, MB Christie called for more innovators on boards to challenge outdated thinking. “A Chief Product Officer like me wouldn’t make it to a board traditionally”, she said, but the fintech industry has created an environment that rewards those who challenge legacy thinking.For fintech, this meant seismic customer-centric shifts in the 2010s, like enabling customers to easily change bank accounts with Open Banking, or ushering in new technology like tap-and-go payments, which the UK was first to adopt. “It opened up new ways to transfer data, and the ability for customers to open new accounts without fear”, says MB Christie.
Disrupting legacy industries with new customer-focused technologies focused on customer convenience helps create an open-minded consumer base, which further primes the market for disruption. As Monzo COO Bhatia explained, Europe’s customer base already has a healthy appetite for innovation thanks to fintech’s recent breakthroughs – having, for example, been one of the first markets to adopt contactless payments. They’re ready for the future. Are the incumbents in our legacy industries? “If you’re not innovating every four years, you are the legacy”, Bhatia added.
Healthy collaborative competition
From digital wallets and peer-to-peer payments to robo-advisors and automated lending platforms, many of the sector’s most revelatory developments have relied on the power of partnerships between fintech disruptors. “For the first time we can really connect data like we couldn’t before”, said MB Christie about banks’ ability to cooperate in the interests of customers.
Monzo’s Bhatia agreed about the power of collaboration. “When you’re trying to make money move for people, you’re working across the space. It’s about outcomes for customers”, she said.At the same time, OakNorth Co-Founder Joel Perlman also extolled the values of rivalry. “Rivalry is essential, it keeps you sharp. When companies are competing fiercely for the same customer, it results in progress.”
Ability to attract funding
UK fintech has become a magnet for investment, accounting for two thirds of the total deals reached across Europe in the first half of 2024.According to our panel, investors across the board are now looking at more than just the growth story of a company. “They want profitability, discipline, but also a solid regulatory model”, said Monzo’s Bhatia. Zilch CEO Philip Belamant echoed Bhatia’s thoughts: “We need purpose-driven businesses, but it’s also policy dependent”.For those that fit the criteria, there is no lack of opportunities for attracting investment. As the largest addressable market outside the U.S., representing 27% of software spend and a GDP of over $20 trillion, Europe is a fertile environment for investment. Over 60 US VC funds have European offices in the UK alone, and with VCs across Europe currently holding £53bn in “dry powder”, there’s a veritable wealth of investment up for grabs for European software companies.
A thriving talent pool
In our quest for unicorns, we can’t forget about the talent we need to bring them into existence. On our panel, MB Christie explained that encouraging small businesses is just as crucial as larger companies in terms of fostering growth in our industry, because that’s where the talent comes from. “We need to make sure we’re bringing up the next generation of entrepreneurs”, she said.
Fintech, along with so many sectors, requires both flexible access to global talent as well as the continued development of skills at home. Companies need assurances that if they jump through all the regulatory and bureaucratic hoops they’ll be able to hire the talent they need to grow their business. “If you can solve the talent question, that will go a long way”, concluded OakNorth’s Joel Perlman.
Is the magic already spreading to other sectors?
There’s never a surefire formula for growing an entire industry, but UK fintech at least gives us a blueprint to work from.
But our data shows that there is a flourishing start-up scene across Europe, with the software ecosystem more than doubling in value since 2018. That growth is reflected in the acceleration of Boardwave itself, with our community having nearly doubled to over 1700 members in the past year.
Our challenge now is helping to scale more mid-size companies across Europe into unicorns.
We did it with Fintech. We can do it elsewhere too.
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