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The UK has been at the centre of a fintech revolution – what does it need to do to maintain its position?

The UK has been at the centre of a fintech revolution – what does it need to do to maintain its position? 1

By Radeep Mathew, Head of Consulting at Leyton UK.

UK fintech is a great success story. There are over 1,600 fintech firms in the UK, a number which will double by 2030. London is the global fintech hub as investment has reached record highs. Over the last three years UK fintech investment has increased by a staggering 500 percent. The sector provides jobs for over 76,500 people here in the UK, which was also the first country to introduce its own regulatory fintech sandbox.

At the centre of this decade-long fintech renaissance is the development and harnessing of software. The fintech sector has been among the UK’s most innovative, and despite recent economic challenges brought about by Brexit and COVID-19, the industry continues to grow by leaps and bounds. In fact, the COVID crisis has only accelerated innovation in the sector as consumers move to digital banking tools. One survey found that since lockdown there has been an increase in usage and trust of financial services apps.

The innovative environment within the UK has fostered enormous growth within the fintech sector. So, how has the UK created this innovative framework for the fintech sector to develop? Firstly, Government schemes such as R&D tax credits have played a huge role. Each fintech company benefits from innovation. It represents a cash opportunity, not only because of revenues and profits brought by improved services, but also because of R&D tax claims. In fact, many fintech companies will be surprised to hear that they qualify to claim back thousands of pounds.

Let’s take big data for instance. Its application is sweeping across financial services and banking industries at remarkable pace. The area has the possibility to transform the sector by improving operations, establishing smoother customer experiences and making rapid, smarter back-and-front office decisions. What is often overlooked is that companies can claim tax relief if they participate in unique areas of predictive analysis, or if they improve their ability in organising or retrieving data. Even merely handling larger volumes of data could qualify for a successful R&D claim.

The Government also considers tax claims for another key area for software development within the financial services space, blockchain. Companies utilisating new blockchain technology can often qualify for R&D tax relief. Improving transaction speeds, further security features and greater quality of data are all encouraged under the policy.

Accordingly, the UK has become a source of fintech talent, with the required conditions for education of the best software developers. This is a central basis for the industry’s success. Technology skills are highly valued, and the Government has played its part in promoting this skill set and attracting some of the best brains from around the world. The UK is home to the world’s original technology visa which has allowed world-class developers to move to the UK, bringing their cutting-edge skills and innovative ideas.

University education is also central to cementing the UK’s position as a fintech leader. The UK boasts world-leading universities such as Oxford and Cambridge, as well as renowned computer science departments at Imperial College London, the University of Edinburgh and Manchester. With Brexit imminent, the fintech industry faces its fair share of challenges over the coming years. Similarly, with calls emerging for stronger governance around privacy and data, in addition to the challenges of cyber security, it is vital that the UK continues to attract the best talent.

It is crucial that the UK remains a global fintech leader as we emerge from one of the deepest recessions on record. With digital banking reaching new heights because of the pandemic, the Government must take proactive measures to reward those firms that are pushing ahead and offering innovative solutions to the financial concerns of consumers.

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