Amy Duff 2 Mar 2017 03:47pm

The future of fintech

February saw the launch of Fintech Fortnight, a series of events and discussions in London around fintech as a disruptor and what the future holds for the 60,000 or so people employed in the sector

Caption: Fintech Fortnight seeks to explain the impact on businesses and consumers.

As James Godfrey at organisers the Relations Group told economia, “We set up Fintech Fortnight because the whole financial industry is shifting to enable businesses and customers to interact with all aspects of finance. We took an approach that would allow start-ups right through to market leaders to explain the impacts of fintech on both businesses and consumers.”

ICAEW worked with the Relations Group as a partner and hosted an event at Chartered Accountants’ Hall. Philippa Kelly, ICAEW financial services assurance manager said: “ICAEW believes the accountancy sector should be at the forefront of helping companies embrace the opportunities fintech brings. Many are not taking advantage of these open opportunities – chartered accountants can play a central role in educating companies on the benefits of fintech, as well as the optimum time to invest. It feels like everyone is talking about fintech, but knowing how it could benefit you and your business, and the potential risks involved, takes time to understand.”

There is a lot of chatter around fintech, confirm Alex Dell and Guy Wilkes, partners at law firm Mayer Brown. “The fact that the big financial institutes are interested in, and are collaborating with tech start-ups proves that fintech is the future of finance,” they say.

But don’t think it’s exclusive to London. China rose to top spot in KPMG’s 2016 Fintech 100 list. “We are seeing the emergence of exciting fintech players in countries across the world, from India to Israel, from Portugal to the Philippines. In fact, the Top 50 Emerging Stars list for 2016 includes companies from 22 countries, including Chile, the Philippines, and Mexico for the first time,” the report said.

And growth in the European fintech sector is ahead of the rest of the world, with recent reports showing that private equity deals in Europe have reached a five-year high. In 2016, the number of European fintech deals rose by 11% to 179, compared to a 1% global drop.

So what are the reasons for Europe's advantages in financial technology, and how is the continent managing to outperform the global trend? According to Dell and Wilkes, the reasons are as follows:

Deal activity 

While equity financing of fintech companies attracts the most profile in terms of the types of deals carried out, the majority involve the purchase of products from fintech firms, or the commissioning of work from them. There are also increasing instances of fintechs entering into joint ventures with well-established financial services companies, which not only have a wide customer base but can also have a better understanding of the regulatory climate and how to manage the risks that arise from technology. Other deals include well-established companies taking minority stakes in fintech firms, as well as outright acquisitions.

London is undoubtedly a major financial centre and one of its attractions is the co-location of the fintech and financial services industries. Other fintech centres such as Berlin or Silicon Valley are disadvantaged by being separate from the financial centres of Frankfurt and New York respectively. London’s favourable rules when it comes to banking and finance have also helped attract talent from wider Europe. As a result, London has been established as a hub for fintech companies that have developed mechanisms for P2P lending, receivables financing, money transferring, and equity crowdfunding. While Silicon Valley still dominates investments globally, according to CB Insights, Europe is holding its own as more companies, investors and consumers join the European space.


Regulatory barriers are a concern for the fintech industry, and while regulations do differ across Europe, the existence of the financial services regulatory passport does simplify cross border activity. While regulation in the US is in generally no more restrictive than Europe, financial services companies frequently have to register or obtain approval in 50 states and apply differing rules and standards in each. While fintech firms still have a dependency on financial services companies to provide investment as well as access to their customer base, fintech firms are hungry, agile and more willing to move jurisdictions for a relatively minor edge on their slower, more bureaucratic counterparts.


When it comes to deal activity in the fintech space, the uncertainty surrounding Brexit is acting in some cases as a brake on investment but in other cases is a driver of activity. Concerns around losing access to the single market can necessitate restructuring in order to gain or retain a foothold in the EU27 and in some cases the acquisition of a continental target might provide that access.

There are also questions about whether firms will consider relocating to other European cities that have growing fintech industries, such as Amsterdam and Berlin. The majority of fintech firms are concerned that attracting or retaining talent in the UK will be more difficult post-Brexit. While the UK government appears committed to allowing the inward migration of the skilled workforce that fintech needs, until the details of the UK's future migration policy are finalised, concerns remain.

While the future for fintech and financial services is a bright one, conclude Dell and Wilkes, there remains uncertainty. Significant investment hangs on the widespread adoption of blockchain technology, which is still largely untested and carries regulatory risk. Similarly, new platforms or payment mechanisms require a critical mass of users to make them viable, and in many cases this has yet to be achieved.