How fintech start-ups in UK are challenging traditional financial services

Dec 08, 2018

How fintech start-ups in UK are challenging traditional financial services

UK is the bedrock of innovation in the emergent fintech sector. Emergent fintech providers or small, innovative firms disintermediating incumbent financial services firms with new technology, are leading the sectoral revolution in the country. UK is home to half of all the promising fintech start-ups across Europe. Given their inherent user-friendliness, technology integration and transparency, these models do not face the barriers faced by traditional financial services providers such as trust, credibility and business scalability.

The fintech landscape in the UK

UK’s fintech revolution is driven by a combination of factors such as a progressive regulatory system, support to nurture a talent pipeline, rapid technological advancements supported by sturdy infrastructure. Another important factor is the consumer base that is willing to experiment and adapt to innovations in the sector. In March 2018, the UK Government unveiled its fintech sector strategy which is designed to preserve and increase the country’s edge in the sector.

Impact on traditional financial services

Given the rapid expansion of the sector, the country has witnessed innumerable examples of fintech players challenging the traditional approach to delivery of financial services. Let us look at some of the areas of fintech disruptions and their impact closely:

1. Banking

A recent report by leading consultancy firm, Accenture shows that new entrants to the banking sector – such as challenger banks, non-payment banking institutions and big tech companies – have captured around a third of the sector’s new revenues. UK, with its combination of established expertise in finance, regulatory support for open banking and a rapidly growing consumer base for innovative services, is harnessing this disruption. In fact, 63% of the newcomers have taken up 14% of total banking and payment revenues in the country. Further, leading challenger banks have surpassed the 1 million customer mark and 15 fintech firms have been granted full banking licenses in the country.

2. Insurance

Insurtech, across the functions of distribution, underwriting and servicing, is gaining significant traction among fintech investors. UK is the rising capital of the insurtech sector. Since 2016, UK’s insurtech sector has reported a total growth of 117%. In 2017, USD 364 million were invested in the country’s insurtech companies. The industry’s rapid growth reflects investors’ response to consumer appetite for change in an industry sitting on trapped value.

3. Asset Management

With over £6.2 trillion assets under management, UK is the largest fund management centre in Europe and the second largest globally. Earlier in 2018, UK’s Investment Association announced the launch of VeloCity, the fintech accelerator for the asset management industry. The accelerator aims to enhance customer experience and increase operational efficiency by enabling businesses to turn technologies such as machine learning, artificial intelligence and big-data into business-ready solutions – from fund distribution to marketing.

4. Emerging Platforms

UK is the leader to some of the most innovative platforms such as P2P lending and crowdfunding – financial services that directly connect lenders and borrowers. Founded in 2005, Zopa was the first P2P lending in the country. Further, significant progress has been made in disruptive technologies in personal wealth platforms which offer advice and growth opportunities to potential investors. The country is also a leader in aggregator platforms which are major distributors of financial products.

Evidently, UK has continually demonstrated how technology and finance can collaborate to enhance the efficiency of the financial services sector. It has shown that the integration can increase transparency, improve security and compliance and provide support and guidance to the secondary rung of stakeholders. At the community level, these disruptions facilitate greater financial inclusion by making financial services more accessible and usable among the hitherto marginalized audiences.


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