One of the most lucrative industries in which startups are having a significant impact in, is undoubtedly , Financial technology. This disruptive market is proving to be particularly lucrative as financial processes have been simplified through digital technology, which is proving to be a genuine challenge to traditional financial services such as a banks and building societies.
According to Oscar Williams – Grut from Business Insider UK “ Many Lenders are losing business to more innovative and customer – focused startups offering cheaper, quicker online services” It is important to understand and explore the fintech phenomena and why this could be an industry to break into for any would be entrepreneur.
What is fintech?
The term is broad and can be applied to many different industries. However at its basic level it is essentially any type of transaction whereby digital technology can be utilised,can be considered fintech.
According to the site Hot Topics “ As a definition, fintech is usually applied to the segment of the technology startup scene that is disrupting sectors such as mobile payments, money transfers, loans, fundraising and even asset management.”
The article goes on to further explain that these new digital payments are turning the conventional model of local high street banks and physical investor’s upside down. So in short the best way to understand fintech is that it is a disruptive challenger to traditional methods of transactions and financing.
Why has Fintech become so lucrative in the UK?
There can be no doubt that Fintech companies have become incredibly successful and this is reflected in their overall value. According to the Ernst and Young report Landscaping UK Fintech the value of Fintech to the UK economy is £20 billion in annual revenue – and is expected to grow.
There are tangible factors that can explain these figures: Firstly, society in general has become far more digitalised and the overall usability of fintech systems compliment our need for quick and instant information.
Another prominent factor, that was cited, was the lack of trust in large institutions – particularly in light of the global financial crash of 2008. According to the report “This has created an environment whereby the UK consumer is open to adopting new business models and products from new providers.”
The new disruptors and innovators
Clearly technological innovations and distrust in the dominant financial institutions do explain the growth of fintech to a degree – but what about the companies who have driven this growth. What features and benefits have they brought to the table to challenge the status quo?
Transferwise – They refer to themselves as ‘ Money without borders’ and it is clear to see why: They are significantly cheaper than banks when it comes to sending money abroad. According to the site the reason for this is because they convert ‘Your money at mid – market rate and matches you with people sending in the other direction.’
Funding Circle – The growth of crowdfunding has been perhaps one of the most brilliant developments that have come out of fintech, and Funding Circle have played a key role in growing this form of quick investment. Such has been the enormous success of Funding Circle that now the government’s lending arm the British Business Bank is now using them for lending.
Nutmeg – This company have taken the idea of having to use a financial consultant and turned it digital. They will create a diversified portfolio tailored to your needs whatever they may be. According to their site they are significantly cheaper than your typical wealth manager and you could stand to save ‘ Between 0.24% and 0.94% per year ’.
Aire – A new way to calculate credit scores which takes a more personal approach to the way you can be scored rather than focussing solely on ‘Past repayment history and antiquated checks.’
These are of course a fraction of what the fintech market has to offer, but what this does show is the fantastic features and benefits of what these companies have to offer, and that they are genuine factors to explain their growth in the market place.
So if you can spot a gap in a payment system whatever it may be it’s worth exploring this possibility, as you may well be onto something that could turn into a stellar startup.
Madesimple is a business services provider offering a variety of different products to startups. This includes company formation , credit checks, virtual office services, domain name hosting and tax returns.
For more information on how MadeSimple can help your business, start, run and grow see here.
Further reading: What are the next big trends in fintech?
Berlin outstrips London for percentage of new start-up growth
Berlin has seen a higher percentage of new start-ups than both London and Paris in the past 18 months, according to research by Creditsafe.
London still sees the highest number of new start-ups but falls behind Berlin and Paris for percentage growth
The German capital has seen an increase of 22% in active businesses across the period, higher than both Paris (14%) and London (9%). However, London is still seeing the highest total number of new businesses – with 63,030 registered in the past year and a half.
This is significantly higher than both Berlin (10,610) and Paris (8,695). Traditional hub Brussels has, in contrast to other major European cities, struggled to attract new business. It has seen the number of active businesses fall by 37 (0.7%).
Brussels also has the highest business failure rate (3.15%) of the four major cities. The good news for London is that it leads the way in this regard with an impressively low 0.39%. Berlin (0.75%) can boast a similar figure but Paris posts a relatively disappointing 2.95%.
Creditsafe operations director Rachel Mainwaring said the research “points to huge variance in economic recovery and growth across Europe”.
“While London, Berlin and Paris are all successfully incubating new businesses Brussels is going in reverse. However, even in rapidly expanding cities thousands of businesses are still failing each year. It is therefore imperative to check out potential suppliers and partners with a detailed credit report,” she continued.
“The London business market is dominated by business support services, management consultancies and technology consultancies. Berlin’s biggest industry sector by contrast is real estate, while in Paris it is firms offering professional, scientific and technical activities.
“Perhaps reflecting the tastes and desires of European diplomats at two, three and four on the list of largest business categories in Brussels are ‘eating-houses with limited service’ ‘eating-houses with full service’ and ‘cafes and bars.’”