How Did London Become The World’s Fintech Capital?

11 June 2017 By Alastair Cleland

1553 Original

​London’s financial technology scene is positively flourishing. Cities worldwide may contest the British capital on many digital fronts, but for in the sub-sector finance (fintech), it’s London all the way.

A recent episode of the BBC’s flagship business programme The Bottom Line (on ‘Fintech’) explored how London beat Silicon Valley to the top, and the ‘disruptive’ challenge it poses to traditional banking.

So why did fintech emerge, and why does it continue to flourish, here in London; what are the most exciting projects currently in development; and how can YOU get in on the action?

Banks vs ‘Disruptive’ Startups: A Zero-Sum Game?

Financial services isn’t the first sector that springs to mind when you think ‘innovation’ or ‘technology’. Complex, highly-regulated and rooted-in-tradition: there are numerous hurdles standing in the way of any budding entrepreneur with ambitions to develop an “Uber for banks”. This, surely, remains a field where major players – the big banks - retain control?

Big banks are, on the whole, savvy enough to acknowledge their vulnerability to disruptive digital technology. The digital revolution marches on, and banks know they either jump on board or fall by the wayside. Some are fostering innovation, others buying up promising tech businesses – there are many ways to keep up.

Barclays, perhaps more than any other bank, protects itself against technological obsolescence by running highly-sophisticated, investment-backed Accelerator programmes and incubation hubs for fintech startups – both with major bases in London.

In fact,300+ banks have global headquarters in London, so it’s unsurprising that fintech activity is concentrated here. But traditional banks aren’t the only origin of London’s fintech innovation…

London: A "Petri-Dish" For Financial Technology

A whole host of factors come together to make London a hotbed of fintech activity. “You basically have Silicon Valley, plus Wall Street, plus Washington DC, all in one place” explains tech venture capitalist and UK envoy for the sector, Eileen Burbidge.

In total, UK fintech firms secured a staggering $5.4 billion investment 2010-15.

It’s the combination of 3 key factors that explain London’s fintech dominance:

1 – Historical Financial Centre

London’s financial sector is centuries old. The city’s longitudinal location – and GMT+0 time zone – allows London to administrate financial transactions globally, from the Americas to Asia in a single business day. Few other major cities in the world can offer that service, making it a crucial USP for London.

Major institutions headquartered in the city include:

  • The Bank of England

    – The UK’s central bank, established 1694

  • London Stock Exchange

    – Established 1801, today with market capitalisation approaching US$4 trillion

  • Lloyd’s of London

    – Financial services conglomerate: insurance; banking and beyond

  • HSBC

    – Headquarters controlling the bank’s network of 7,500 offices across 87 countries worldwide

2 – Abundant Technical Talent

Software developers are fundamental to digital progress, and London’s got more of them than any other city in the world. Fed by a network of prestigious educational institutions, and boosted by talent migration from the EU and beyond, London is a brilliant place to hire tech stars.

71,000London-based professional developers were registered on tech portal Stack Overflow when analysed in 2015, and research by Oxford Economics predicts growth of 22% by 2025.

Former London mayor Boris Johnson(never one to miss an opportunity for a soundbite!) called the city “a hotbed for tech talent”, extolling that “London based businesses can benefit from access to an unparalleled talent pool.” Abundance of technical talent is an asset that’s brought tens of thousands of tech business ventures to the city – of which fintech is just one sub-sector.

3 – Progressive, Open-Minded Regulators

Globally, the red-tape of regulation can put a dead stop on fintech operations. Regulation can make closed systems inaccessible. It can shut down operations, restrict expansion and slow progress to a crawl. Truly innovative services – like peer-to-peer lending – can even create a need for entirely new regulation to be introduced pre-launch.

London’s attitude to financial regulation is, to many, refreshingly progressive.

“Policy makers really understand, perhaps as a result of the events in 2008, the importance of a resilient, innovative financial sector” says Burbage, and are willing to work quickly to support pathways for fintech innovators. In the fast-paced world of tech business ventures, this factor is critical.

Bonus Factor: A Highly Receptive Consumer Market

Fintech startup Monzo told the UK: “It’s time for a new kind of bank”. Launching as an iOS and Android app in 2015, at one point the service had an incredible 200,000+ people on their waiting list for payment cards. Consumer demand is enormous, particularly for the typically dry financial services industry. Monzo even holds happy hours to meet customers in person – imagine doing that with HSBC!

London and the UK offers a large, forward-thinking consumer market for tech products. This allows fintechs to both create, test and launch their offering on home turf. A hugely attractive opportunity!

London’s Fintech Scene: The Career Opportunity

All this fintech activity makes for a thriving job market. Fintech employers hire talent from across the spectrum: from within traditional banking institutions; directly out of top universities; from related digital sectors; and beyond.

High profile fintech employers include:

  • Nutmeg

    – Smart, online, personal investment manager

  • TransferWise

    – Peer-to-peer money transfer service

  • Zopa

    – Peer-to-peer lender, matching borrowers and lenders without the bank

  • Ten-X

    – Online real-estate marketplace for buying and selling homes

  • Funding Circle

    – Peer-to-peer small business lending, connecting investors and businesses

  • Trussle

    – Near-instant mortgage brokerage, from 90+ lenders

  • WorldRemit

    – Global money transfer service for friends and family abroad

Not to mention the likes of Facebook, Google, Amazon and other major tech players running significant fintech operations from bases in London.

So, whether you’re a lawyer, a developer, a marketer, a strategist, an an analyst, or any other professional who can see potential in this sector, London’s fintech scene could provide afascinating, exciting career path.