The recent financial crisis left many British financial institutions on the edge of bankruptcy but has opened up opportunities for financial technology start-ups.
Despite the colossal losses incurred by the major financial institutions, the City of London hasn’t shut shop. Far from it – the UK remains the world’s leading exporter of financial services. But things have changed and there are a number of new kids on the block.
There’s been an explosion in the number of start-ups offering alternative ways of handling deposits and offering loans and mortgages. These new companies are not afraid of experimenting with new technologies to create alternatives to traditional banking and they’re increasingly challenging the major banks by disrupting the financial services industry in lots of new and interesting ways.
What, how, when, where?
Of course, the technology itself is largely responsible for the success of alternative banking. What once required several meetings and a lot of paperwork can now be done with a few taps on a smartphone.
And so we have the rise of FinTech, or financial technology. This new sector is gaining momentum worldwide, with London leading the way. The city’s FinTech sector is growing at the fastest rate globally. In 2014 alone FinTech generated over £20 billion of revenue in the UK while employing over 135,000 people.
Here are some examples of successful Fintech start-ups based in London:
Money Transfer
TransferWise
One of the best known FinTech start-ups is TransferWise. This technology allows users to transfer money abroad using their website or app at a much lower cost than a bank would charge. TransferWise’s policy of transparent fees is obviously attractive to customers, having transferred £1 billion since the company was launched in 2011.
World First
World First is a London-based foreign exchange company offering currency exchange and international payments to private clients, corporate and ecommerce clients in the UK and a number of other countries.
Payment Processing
GoCardless
Another example of a successful FinTech initiative is GoCardless, which allows groups or businesses to accept recurring payments online, reducing time and paperwork significantly. The company has won a wide variety of clients and now holds the title of the UK’s number one direct debit provider.
Astropay
AstroPay provides users with alternative ways to pay online in local currency for cross-border purchases in emerging markets. Users can use either a prepaid card, a visa card, or make an instant payment using AstroPay direct.
Cyber situational awareness
Digital Shadows
Covering a slightly different area, Digital Shadows aims to provide businesses with ‘cyber situational awareness’; protection and advice regarding the digital footprint they are leaving behind. To do this, the technology monitors millions of data sources, including social media in 26 languages, to identify and mitigate security threats.
Risk management
DueDil
Another gap in the market was found for business-to-business risk management and lead generation. Since 2009 DueDil has set out to fill this gap. Marketing itself as a ‘growth-stage technology company’, it is essentially a private company research tool which helps businesses to find new clients.
Lending platforms
Funding Circle
Peer-to-peer lending platforms have also taken off in recent years, helping borrowers to save on excessive bank fees and enabling lenders to back small businesses and earn a satisfying return. Funding Circle is one such platform which currently estimates an annual return of 7.4% for its lenders, and has facilitated in excess of £750 million of peer-to-peer loans to date.
LendInvest
LendInvest is another form of peer-to-peer lending technology which focuses more specifically on providing mortgages for buy-to-let investors and property entrepreneurs.
Zopa
Zopa was founded in 2005 and has since become the UK’s largest peer-to-peer lending platform, having won numerous awards and helped people to lend in excess of £989 million over the past decade.
MarketInvoice
MarketInvoice allows UK-based companies to sell their invoices online, giving them quick access to funds which may otherwise be locked up for some 30-120 days. The service offered is a quick solution to freeing up cash flow, without having to take out a loan.
Personal Finance
Nutmeg
Nutmeg is a platform that has been developed for individuals to create an online investment portfolio. These investments are most commonly ISAs and pensions, and are personalised according to your preferences, for example on the degree of risk you are willing to take.
Why London?
London is home to 24 of the ‘FinTech 50’ companies. More than 50% of all European venture capital investments in FinTech made last year went to firms in the UK capital, amounting to $539 million (£342.6 million) of funding. The London sector also employs 44,000 more people than New York or Silicon Valley. But why?
The capital’s geographical location may have a lot to do with this. London falls into a convenient time zone which allows UK based companies to do business with Asia in the morning and the US in the afternoon. London is also home to some of the world’s best Universities which provides a huge pool of graduates to allow these companies to attract the best talent in order to grow their businesses.
The city is hugely multi-cultural but also attracts a significant amount of talent from abroad. This allows it to lead the way in website and app localisation. The process of localisation is essential to selling a product in an overseas market and is therefore a crucial aspect for any business looking to successfully expand into international markets.
A boon for financial translators?
The rise of Fintech will undoubtedly be accompanied with an increase in demand for translators with expertise in banking, finance and technology.
However, the race is on in many countries to develop their own financial technology sectors. The French and German markets, for instance, already have their fair share of Fintech start-ups which could mean that UK firms are presented with stiff competition when entering these markets. Our advice for these firms would be to start planning international expansion programmes sooner rather than later.
