Funding, scaling up, diversity: The challenges and opportunities facing UK fintech businesses

Despite the divergence in growth rates, just 16 per cent of the firms examined for the study had a female founder. More than half of fintechs had more than one founder and the average age of all founders was found to be 38 years old.

The “Scaling UK Regional FinTech” report - published today - delves into the growth and development of 250 of Britain’s regional fintech scale-ups outside of London and is supported by a range of interviews with industry leaders and entrepreneurs. The research project, undertaken by Whitecap Consulting and co-published with Innovate Finance and Streets Consulting, comes as the sector looks to accelerate the roll-out and growth of fintech ventures across the UK, including in Scotland where the number of people employed in the industry has grown by almost a quarter over the past two years.

According to data published in the Kalifa Review, the UK fintech sector accounts for as much as 10 per cent of the global industry and comprises around 2,500 companies. The review also stated that by 2030, fintech’s contribution to the UK economy is predicted to reach almost £14 billion.

The UK attracts more fintech investment than the rest of Europe combined and is second only to the US, according to the latest investment report by Innovate Finance. Data from the Department for Business and Trade paints a picture of a UK fintech industry employing some 76,500 people, which by 2030 is expected to grow to some 105,000. A recent report from industry organisation FinTech Scotland revealed that the country’s burgeoning fintech cluster now supports in excess of 10,500 people across 226 small and medium-sized enterprises (SMEs).

Several key findings have emerged from the Scaling UK Regional FinTech report, including that firms with female founders achieved 30 per cent greater turnover growth than those with male only founders. The more founders, the higher the revenue growth rate - companies with up to four founders were part of the study.

Meanwhile, raising investment correlates to higher employee and revenue growth, but revenue grows at a proportionally lower rate. Some nine out of ten firms that attended an accelerator went on to raise funding, the study found. Fintechs operating in the areas of payments and “wealthtech” account for the largest number of scale-ups, but property tech firms are most likely to successfully raise funding.

Julian Wells, director and fintech lead at Whitecap Consulting, said: “The research highlights some fascinating and surprising trends, but also contains valuable advice from those founders who have ‘been there and done that’ in terms of creating and growing new fintechs. The main message for us from this report is that in today’s world where you scale a business is nowhere near as important as how you scale a business.

“What is not a surprise to us, is to see so many regional fintech innovators succeeding outside of London - there is an extremely vibrant ecosystem of fintech innovators across all four corners of our nation. These are exactly the kinds of data and insights which can help shape the UK’s effort to maintain its position as a true leader in global fintech.”

The report lays out a series of recommendations, including encouraging diversity in fintech leadership. It argues that more initiatives are required, building on a new government taskforce to create dedicated funding for female-founded businesses and to provide support for other challenges faced by female entrepreneurs. The report also notes that more support is required in terms of tax relief schemes and access to suitable sources of funding.

For entrepreneurs looking to push into the sector, it stresses that companies which are part of an accelerator stand a greater chance of successfully raising investment. The coaching, guidance and contacts within accelerator cohorts can provide assistance as organisations scale, it notes.

Julia Streets, chief executive of Streets Consulting, said: “It’s tremendous to have partnered with such prestigious fintech industry experts to produce this report, which shines a bright light on the opportunities and challenges facing our regional fintech scale-ups. We see these stories day in, day out, as we advise our clients and coach with incubators in this important sector for UK economic prosperity.

“The data on diversity from this report is bitter-sweet. Once again we see the benefits of diversity and inclusion, since fintechs founded by women significantly outperform those founded by men; but once again we see the size of the challenge, as fewer than a fifth of fintech firms are founded by women.”

Stephen Ingledew, chairman of FinTech Scotland, added: “Fintech entrepreneurship continues to drive financial innovation and positive economic outcomes across all corners of the country and this insightful report demonstrates the significant contribution being made by fintech SMEs throughout our regions and cities. All the fintech centres across the UK have an opportunity to build on this to support many more business success stories in our regional communities and benefit the UK economic growth ambitions.”

To create a study “robust in its methodology and accurate in its insights”, the report’s authors gathered information on 250 fintechs based outside of London and the south-east of England, spanning many different regions and analysed the data thoroughly. Additionally, “deep-dive” one-to-one interviews were conducted with ten fintech entrepreneurs from the UK’s primary fintech regions.

Fintech fast lane: Scotland sees job numbers jump by quarter in two years with more to come