Fintech in the UK has been essential to the success of the financial sector in finance. Fintech is the UK’s strongest startup sector, which has received more venture capital funding than any other sector, with more than 1,400 high-growth fintech companies currently operating, 20 fintech unicorns (roughly half of the UK’s billion-dollar startups), and.
UK fintech companies have raised a total of £21.9 billion in equity funding to date, with an astounding £7.41 billion of that amount secured in 2021 alone.
These fintech startups and scaleup businesses are successfully disrupting the traditional banking and financial services sector as they expand, and they are also inspiring innovation among market leaders.
What is Fintech
Fintech, as it is more commonly known, is a term used to describe new technology that aims to enhance and automate the provision of financial services.
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At its core, fintech uses specialized software and algorithms that are used on computers and, increasingly, smartphones to assist businesses, business owners, and consumers in better managing their financial operations, processes, and lives.
Technology firms such as challenger banks, payment processors, budgeting apps, and cryptocurrency startups fall into this category.
The number of fintech companies operating in the UK and globally has increased over the last decade, as has the number of people incorporating financial technology into their daily lives.
Fintech companies offer streamlined, user-focused products and services as an innovative alternative to traditional industries such as banking, payment processing, and lending. But what exactly makes fintech the UK’s most successful startup sector?
More money is invested in fintech than any other fast-growing sector in the UK. Therefore, it is not surprising that 13 of the UK’s 41 unicorn businesses are fintech.
These include four of the top challenger banks in the UK, SumUp, and Rapid, which process payments, and only a small number of the ambitious fintech startups and scaleups that are currently based in the UK. London is the world’s second most active fintech city, after San Francisco.
The Growth Story of Fintech in the UK
London has been essential to the UK’s success in the fintech sector. There is the highest concentration of businesses providing financial and professional services, making it the second-best FinTech ecosystem globally. Additionally, investors are drawn to the city; in 2020, $4.1 billion, or 94% of the UK’s FinTech venture capital, was invested there.
The wider UK FinTech story, however, may be overshadowed by the London FinTech ecosystem’s success. The UK is awash in fintech activity, from Bristol to Birmingham, Edinburgh to Cardiff, and Belfast to Durham.
With extensive financial services experience, technological talent, and progressive regulation, the United Kingdom is a global fintech hub.
5 Potential Highlights
- Payment technology (Paytech)
Paytech in the UK is flourishing thanks to the shifting payment landscape. With investment opportunities in digital commerce, international payments, mobile point-of-sale transactions, and more, the UK is at the forefront of the payment technology revolution.
A single bank transfer used to take days to complete ten years ago. Fintech innovations, however, have offered a remedy for this, enabling quick money transfers without sacrificing security.
The asset management and investment sectors are being transformed by wealth tech. Robo-advisors, portfolio management tools, micro-investment, and social trading platforms, as well as B2B software solutions, all have a lot of potential.
Lendingtech provides solutions that help lenders run more efficiently and reduce the time it takes to process payments. Fintech startups are offering a quick fix to this issue, as it use to take weeks or months for a loan to be approved.
Fintech lenders can frequently process, approve, and release loans within 24 hours by using mobile apps to improve usability and artificial intelligence to determine a borrower’s ability to repay a loan.
One such company that provides quick loans to small businesses is iwoca. Additionally, fintechs like Lendable and Zopa enable peer-to-peer lending in contrast to traditional banks, which demand deposits from borrowers in order to extend loan offers to other clients.
Online or mobile banking services like deposits, transfers, account management, and loan management are provided by digital banking.
Nearly 25% of British adults have accounts with banks that only offer services online, and 66% of banking customers say they intend to fully switch to digital banks in the future.
Digital currencies and Distributed Ledger Technology (DLT)
Cryptocurrency is a digital currency that can be securely exchanged because of blockchain technology at its core. Cryptocurrency transactions are decentralized, as opposed to traditional currency transactions, which are verified by a central authority.
Blockchain on the other hand is a digital ledger that records and validates transactions. These transactions cannot be removed or modified once they have been added, protecting them from tampering.
In 2026, it is anticipated that the global market for blockchain technology in the financial sector will be worth £16.7 billion. In the near future, it is anticipated that cryptocurrencies, trading platforms, non-fungible tokens (NFTs), alternative asset trading, and support systems will rule the market.
Top 10 Fintech Companies In The Uk
Startup unicorn Checkout.com is the first fintech company on this list. With over 150 different currencies available, it creates software for businesses to process their online payments in multiple currencies. The payments platform at Checkout.com, which combines various payment technologies, aids in managing every step of the procedure.
Along with other well-known methods, it accepts a wide range of payment options, including direct access to Visa, Mastercard, and American Express.
Risk management is a top concern for fintech, and Checkout.com offers a machine learning model that has been trained to spot potentially risky transactions.
This risk-scoring system guard against fraud and guarantees the safety of payments. Leading corporations like Sony, Klarna, and Deliveroo are among the firm’s clients.
Total amount raised: £1.36b
Another unicorn in the fintech industry, challenger bank Revolut offers a digital banking app with financial services that lets users track and send money, trade cryptocurrencies, and more.
Revolut provides multiple plans, including a free Standard account, a Plus account for £2.99/month, a Premium account for £6.99/month, and a Metal account for £12.99/month, to its more than 18 million customers worldwide.
Each plan has extra benefits, but the Metal account gives users access to the cashback in any currency they choose, including cryptocurrencies, and four times the usual amount of surcharge-free ATM withdrawals.
Revolut, a fintech startup from London founded in 2015, had more than 2,100 employees as of 2020, also the European Central Bank granted Revolut a full banking license in December 2021.
Total amount raised: £1.27b
Location: Tower Hamlets
One of London’s most innovative FinTech companies, Monzo, runs a digital-only bank with specialized features and services to meet the needs of its customers. The fintech app, which was founded in 2015 with the goal of creating the best bank account on the planet, has more than 5 million users as of this writing.
By concentrating on people’s actual challenges rather than trying to sell their products, Monzo makes a difference in the banking industry. They actually give their users control over their finances.
Investors in Monzo include Accel, General Catalyst, Thrive Capital, Goodwater Capital, and Passion Capital.
As of September Monzo launched Monzo flex, a buy now and pay later product that allows customers to divide the cost of purchases into three interest-free payments.
Total amount raised: £927m
Location: City of London
Starling Bank, the winner of the Best British Bank award for four consecutive years from 2018 to 2021, is one of the top fintech companies in the UK, offering everything you’d expect from a full-service bank account.
In 2004 starling bank was founded, what it does is that it provides rational banking solutions such as settling up, disabling or restricting payments, freezing your card, categorizing spending habits, providing international transfers of money, and more. Over 2.5 million customer accounts have been created so far.
Total amount raised: £715m
Location: City of London
Zilch Technology is a BNPL fintech firm that provides an app that allows users to make zero-interest staggered payments for online shopping. Unlike many other buys now, pay later companies, Zilch is governed by the Financial Conduct Authority (FCA).
What Zilch does is that It unifies all of your accounts into one location, making it easier for you to manage your payments. Additionally, you can shop with thousands of brands without paying extra, or for a small fee, you can use Zilch Anywhere.
Only 25% of the total is required upfront; the remaining balance is spread out over 6 weeks. You have the option to snooze payments, giving you four extra days, or set alarms.
Total amount raised: £291m
Sellers can process payments using mobile devices thanks to SumUp, a payment processing company. SumUp works with more than 3 million businesses and operates in 34 markets across three continents. Since its establishment in 2011, the fintech company has acquired a total of six businesses, including Payleven, Shoplo, and Tiller.
Through six funding rounds, SumUp has so far received £526 million in equity investment. Fin Capital, Blackrock, Bain Capital Tech Opportunities, and a number of other investors are among those who have supported this.
In its most recent agreement, SumUp agreed to raise £506 million in equity and loans in June 2022 to support further acquisitions, product development, and growth.
Total amount raised: £526m
Wise (previously Transferwise), an online money transfer service, allows you to send money up to eight times less expensively than a bank.
The system is also incredibly easy to use. By requesting two local transfers as opposed to one international operation, it completely avoids costly international payments.
Total amount raised: £996m
OakNorth Bank was created ‘for entrepreneurs by entrepreneurs,’ offering business loans and property finance ranging from £500k to £45m. It provides loans to the ‘Missing Middle,’ or businesses that contribute the most to economic and employment growth but struggle to obtain fast flexible debt financing.
Borrowers from OakNorth can attend credit committees to directly discuss their company’s growth plans and funding requirements with decision-makers.
Along with loans, OakNorth offers a variety of business savings accounts. Fixed-term savings, Notice accounts, and Easy Access accounts all have competitive AERs.
OakNorth Bank made its first acquisition in 2021, purchasing cashflow software firm Fluidly.
Total amount raised: £637m
Zopa now runs an online bank after previously serving as a global peer-to-peer (P2P) lending platform. The London-based fintech company announced in December 2021 that it would end its P2P business after 16 years in order to concentrate more on its challenger bank offering.
The full banking license for Zopa Bank, which was established in 2020, has been granted, Fixed term savings (backed by FSCS protection), credit cards, unsecured personal financial loans, and secured car finance are all available through Zopa’s banking service.
Users can view the rate they can get without it having an impact on their credit history thanks to its loan calculation.
For the fifth consecutive year, Zopa won the Best Personal Loan Provider and Best Credit Card Provider honours at the British Bank Awards in 2021.
Total amount raised: £516m
The 2009-founded fintech company Zepz (previously WorldRemit Group) develops an online platform for migrants and expatriates to send money abroad. The Worldremit and Sendwave brands are owned by Zepz.
Over 800,000 users use Sendwave as a quick and easy way to send money to people in Africa and Asia. The WorldRemit app, meanwhile, enables users to send money online to more than 130 nations.
In comparison to the majority of traditional banks and transfer services, it boasts better exchange rates and lowers fees, and 95% of its transfers are completed in under a minute.
This company processed more than 50 million customer transactions and over $10 billion in customer transfers in 2020. WorldRemit was previously listed on the BusinessCloud FinTech 50 shortlist for the most cutting-edge financial technology companies in 2021.
Total amount raised: £497m
What’s Next for Fintech in The UK
According to Nucoro research, more than 6 million adults downloaded a banking app for the first time in March 2020, as COVID-19 triggered a surge in demand for cashless payments and digital banking.
Indeed, last year saw a record number of announced equity deals secured by UK fintech, with 31p in every £1 invested in fintech companies totaling £3.28 billion. And the upward trend in fintech is expected to continue.
As part of the “tech for good” movement, more and more fintech businesses are focusing on reducing environmental damage and offering eco-friendly alternatives to conventional financial services.
According to London & Partners, the Capital is already home to an impressive 30% of Europe’s green fintech startups, such as TreeCard, which invests the proceeds from merchant surcharges in reforestation initiatives, and the cleantech investment platform Clim8 Invest. Future developments in fintech in the UK are likely to prioritize sustainability.