Innovate Finance Manifesto: UK 2020

Innovate Finance , 30/07/2015

Who is Innovate Finance?

Innovate Finance is an independent membership-based industry organisation that aims to advance the UK’s standing as a leader in financial technology (FinTech) innovation both domestically and abroad.

Members range from the world’s leading global corporations to the UK’s most promising FinTech start-ups who through Innovate Finance, receive a single point of access to policy makers, regulators, investors, customers, educators, talent and key commercial partners.

 

Investment in FinTech

Global investment in FinTech-related activity has tripled in the last year from $4billion to $12billion across more than 730 deals and projections for annual global investment in FinTech is expected to reach $46bn in 2020. As such, it is becoming increasingly evident that FinTech and the digital revolution that underpins the expansion of this sector has the potential to fundamentally change the way financial services operate.

The United Kingdom plays a definitive role in the growth of this industry. FinTech is now worth £20 billion in annual revenues to the UK, employs 135,000 people and attracted 42% of all European FinTech investment in 2014.

 

Our 2020 vision

Innovate Finance’s mission is to accelerate the expansion of the financial technology industry to position the United Kingdom as the principal global hub for FinTech.  

With over 120 members from across the FinTech ecosystem, Innovate Finance seeks to address some of the key issues affecting the growth of the sector, from attracting greater inward investment to helping shape the development of proportionate and effective regulation, whilst continuing to champion a truly democratic and inclusive financial services industry.

 

Increasing FinTech Investment

A key challenge to ensuring the UK remains at the forefront of FinTech innovation and growth will be to incentivise continued investment in the space. 

To compete on a global scale, Innovate Finance must continue to shape the conditions necessary to establish an attractive investment environment for UK FinTech. This is important given that $4.7 trillion in revenue for traditional financial services is potentially at risk of being displaced globally by new technology-enabled entrants.

In this context, Innovate Finance will continue to champion schemes such as SEIS and EIS, which provide much-needed tax relief to encourage investment into small businesses and to provide the funding needed to scale and grow. Greater emphasis will also be required to attract larger volumes of venture capital and to better incentivise institutional investors to participate in the UK FinTech space.

Although the UK is Europe’s leading FinTech hub, increasing investment from $264 million (2013) to $623million (2014), Silicon Valley remains dominant in absolute terms for attracting FinTech investment at over $2 billion. This is greater than the entire level of FinTech investment in Europe ($1.48 billion).

The government can do more to incentivise greater investment into UK FinTech through an improved tax and regulatory environment, facilitating greater collaboration internationally through foreign FinTech trade missions, and showcasing the breadth of FinTech talent across the UK from London to Leeds, Edinburgh, Manchester and beyond.

Our vision for 2020 is for the UK to be the most investment-friendly environment for FinTech globally, attracting $4 billion of venture investment and $4 billion of institutional investment in corporate venture funds, accelerators and innovation programmes.  This is up from a UK total of $623 million in 2014.

 

Global FinTech leaders

Another key challenge for the UK FinTech industry is to assist more FinTech companies through the start-up phase and to provide the right funding environment and community collaboration for them to develop into global Fin Tech leaders, whether by IPO, global market share or valuation. The UK is currently home to two FinTech ‘unicorns’ that are valued at over $1 billion: TransferWise and Funding Circle –both members of Innovate Finance. However, given that globally the number of FinTech unicorns has more than tripled over the last year, from 11 to 36 in 2015, more should be done to encourage the growth of these global leaders domestically.

This will require a dedication to attracting smart capital and investment, continuing to build strong linkages across the diverse financial services ecosystem and increasing the quality and quantity of support institutions, investors, accelerators, incubators, corporates and others to enable FinTech start-ups to mature into a global leaders.

Our vision for 2020 is for the UK to be the premier location for at least 25 global FinTech leaders, whether by IPO, global market share or by valuation. The success of this target will be supported by proportionate and effective regulation, a proactive policy environment and a commitment to greater financial inclusion.

 

Future FinTech Talent- Jobs

In order to support our ambitious goals for investment and global leaders we will need the skills to underpin this transformation in financial services. FinTech is a growing, highly skilled and diverse sector compromising a number of technical competencies from across tech and finance. The UK already has 135,000 FinTech employees with 2.4 million working in high tech industries, 825,000 of which are science, technology, engineering and maths (STEM) roles.

In order to attract the investment we need by 2020, we must produce more STEM graduates and a deep pool of mathematical and scientific expertise. Innovate Finance is responding to the government’s drive to deliver another three million apprenticeships, mobilising the FinTech community and helping develop sector led standards. This includes the creation of the world’s first introduction course to FinTech, launched by Open University and developed in partnership with Innovate Finance. 

Increasing investment in UK FinTech and developing an increasing number of global leading companies will help create an additional 100,000 jobs in UK FinTech - supported by a new cohort of FinTech apprenticeships and degree courses, helping to deliver the skills and jobs needed to make the UK the global centre for FinTech.