Cameron Stevens, co- founder of Prodigy Finance, shares his take on the state of FinTech in the UK.
FinTech is hot on the agenda for venture capitalists and investors alike in 2016.
Finance and technology have been linked since Peter Thiel made it okay to share bank details online at the turn of the millennium, but it has blossomed in the past eight years.
FinTech companies are offering models that have stood the test of time and grown sensibly over a number of years, and investors are waking up to the party and taking a real interest in this exciting sector.
The sector has benefited from banks’ diminished power following the financial crisis, but it is about more than stealing market share from banks.
FinTech companies run on innovation and so explore new opportunities and business models, some of which are not fully regulated or even understood.
The top companies offer scalable solutions that re-imagine how to provide finance digitally, rather than tinkering around within existing frameworks.
The sector is heating up
The sector’s innovation continues to grow and the prospects for blockchain and machine learning can add value in areas such as underwriting and eliminating fraud.
Low interest rates, stretching into the foreseeable future, and the plight of banks have also helped to create a perfect storm for a FinTech surge.
This has led to increased investment, particularly in London and the UK, where research from Accenture shows that FinTech startups are receiving more than double the investment of their US counterparts.
While FinTech has achieved a lot in the last decade, and will continue to do so into the future, it is important not to get carried away with the hype.
The industry is still young and many new startups have not seen their offer tested by differing market conditions or regulatory cycles.
The surge in investment interest is good news, but there is a risk that this new cash will not distinguish between established players and untested startups.
The sector is new even by tech standards, and given the impact of cycles and externalities on finance it is important that investors look for a strong track record and sustained growth before making an investment.
London will stay on top
FinTech’s success should be celebrated, particularly given the pioneering role that London plays in the sector.
London is the global FinTech capital, the FCA has shown itself to be a progressive regulator of the sector and our politicians and investors have a sophisticated knowledge of the sector that is the envy of entrepreneurs from Silicon Valley to Singapore.
UK FinTech has the track record and pedigree to deliver continued value and innovative startups in any market conditions.
We founded Prodigy Finance as an international FinTech company.
Europe, and London in particular, was always the natural place to locate the business.
We were able to build and iterate the business slowly with access to top developers, venture capitalists and professional services providers.
The future remains bright for the sector if founders continue to incorporate new technology and develop their startups patiently, and investors look for a companies built to last in this exciting and fast-moving sector.