Dethroned: London steals New York’s global fintech investment crown
October 7, 2019
3 min read
What's going on here?
London has overtaken New York and surpassed San Francisco to steal the global fintech investment crown. The capital now ranks number one for total number of deals secured according to industry body Innovate Finance.
What does this mean?
Fintech stands for Financial Technologies and describes businesses that apply technology to innovate in the financial services sector. That London has excelled in this space recently is due in part to the Financial Conduct Authority (FCA)’s fintech industry charm offensive. The FCA’s Project Innovate allows new firms to test their products, services and business models in a live market environment through their regulatory sandbox. This gives startups the support and freedom they need to develop new solutions without worrying about being penalised.
Accordingly, investors have flocked to the UK hoping to find themselves a “unicorn” company: a start-up that is valued at over $1 billion (e.g. Monzo, Deliveroo). London attracted 114 investments between January and August with a record-breaking value of over £1.6 billion. While San Francisco still leads the way in terms of total value, these figures evidence the fact that the UK is punching above its weight.
What's the big picture effect?
London continues to enjoy a greater reach than any other European hub. Companies based in the capital account for five out of the ten largest European investments recorded so far in 2019, with roughly 40% of investors coming from outside of Europe. In addition, there are more technology unicorns in London than any other city worldwide, thanks to new entrants such as Greensill and Checkout.com. In a global context, the $2.3 billion raised in fintech investment in the UK is impressive when compared with the $9.4 billion for the largest fintech market – the US.
The sector is, however, struggling with talent recruitment and is burdened with a significant gender imbalance. The gender split is 70.5% male and 29.5% female, which has remained unchanged since 2017. The disparity is even more pronounced among fintech company founders. Only 25% of fintechs had at least one female founder, and just 2% have female-only co-founders. Supposing fintech is the future of finance, it is crucial that this balance is redressed so that future leaders represent the clients that they serve.
It is somewhat surprising that London, and the whole of the UK fintech sector, is experiencing rising investment despite both domestic and global uncertainty. The ongoing lack of clarity over Brexit has been met with ambivalence in terms of investor enthusiasm. This may be due to London’s long-standing as a significant financial hub. According to Innovate Finance chief executive Charlotte Crosswell, the UK is “home to world-class talent and [its] historical pedigree enables [investors] to access key global markets”.
It remains to be seen if the UK will lose its position as the global fintech leader after its impending departure from the European Union. Brexit was cited as a concern by 42% of firms, with sector leaders raising concerns over a lack of access to talent and capital. However, it is not just the fintech industry that is threatened by this – as much as £61 billion of business is migrating from London to rival financial centres regardless of any agreement that may be reached. Despite the uncertainty, one thing remains clear; fintech firms must not be complacent with the UK’s fintech dominance.
Report written by Sarina Johal
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