Authors: Nick Pantlin, Caroline Rae, Rich Woods and Terence Lau
The UK’s fintech sector is well established, with many of the best-known businesses having reached the advanced age of five – or even ten – years old. They boast significant revenues, and several of the consumer-facing fintechs have attracted millions of customers. They are competing not only with each other, but with incumbent financial institutions too. And they continue to attract significant amounts of funding: research from KPMG indicates that 2019 was another record year, in which GBP37.4 billion was invested in UK fintech businesses, and the number of deals was the highest since 2014.
All of this is due to favourable conditions for investment and growth, the support of regulators who have sought to promote competition, and the concentration of relevant expertise in the United Kingdom. The question is – to what extent will this change in 2020 and beyond?
There is no doubt that new businesses will continue to be founded, and to grow and disrupt the market. However, the market is now consolidating, alongside continued growth. Established fintech businesses are now well integrated into the financial system in the UK and beyond, and are becoming systemically important. This presents opportunities to ambitious UK fintech businesses – and also, potentially, greater attention from regulators than has been the case in recent years.
In this article, the authors explore two themes that they believe will be important in 2020. First, an opportunity: for fintechs to monetise the significant amounts of data that they obtain in the course of their businesses. This needs to be carefully planned, but presents a route to new revenues for businesses who are willing to invest the time and effort. And secondly, a risk: the increasingly interventionist approach of the UK’s Competition and Markets Authority (CMA), and what this might mean for fintech in the UK.
This article was first published in Chambers and Partners, March 2020
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