According to Roger Gifford, Board Member of Multrees Investor Services and former London’s Lord Mayor, the impact of fintech disruption is spreading to various sectors of the economy, especially in business and financial services. Although the banking sector has been advocating for change, trading businesses and wealth managers will soon be seeing this change first-hand.
London-based tech firms raised $1.6 billion in the first three quarters of 2015, with leading multi-million pound transactions
There are about 44,000 employees in London’s fintech sector, almost the same as New York, while Silicon Valley has four times less. Nevertheless, there are more technologists employed by banks than there are in the tech sector. Generally, London-based tech firms raised $1.6 billion in the first three quarters of 2015, with leading multi-million pound transactions coming from TransferWise, WorldRemit and Funding Circle. For example, WorldRemit raised $100 million (about £65 million) in early 2015 backed by Accel Partners and Technology Crossover Ventures.
According to Mark Whitcroft, a business partner at Illuminate Financial, enterprise fintech is expected to come out single-handedly, even though the main focus has been on disruptive Business-to-Consumer (B2C) fintech. He prefers enterprise fintech to technology tools for major players in the capital markets, including professional investors, banks and exchanges. He added that areas with great opportunities include market drivers such as capital, cost, compliance and control.
Whitcroft also said that some of the fintech trends to watch out for in 2016 are: banks’ initiatives towards joint technology solutions; the drift of technologists from traditional companies to startup firms; and the amalgamated smaller companies capable of a successful transformation from angel funding to financing rounds in later stages of their business.
…the most active segments of fintech will be payments and blockchain
A recent report of Magister Advisors’ 2016 predictions shows that the most active segments of fintech will be payments and blockchain; initiatives which have augmented very quickly. As a result, both established and startup companies are targeting to get a share of the customer market; a trend expected to continue in 2016. The sector is also attracting foreign investors particularly from the US and Japan.
More Mergers and Acquisitions (M&A) are also expected in the corporate activity this year, as overseas firms find the UK environment attractive, just like property investors did before. There are factors, such as low-cost debt and progressively attractive sectors including infrastructure, wealth and investment management, manufacturing and financial technology, which guarantee greater expectations for 2016. Ernst & Young reported that the UK M&A value increased by 90 percent (year on year value), while the number of deals increased from 630 to 680.
Besides London, Whitcroft also noted that some of the global financial centres that are potentially poised for fintech developments include New York, Hong Kong and Singapore.