Has Brexit affected investment into fintech?

by Heat Recruitment

by Rhys Pritchard

Fintech, otherwise known as financial technologies, has been one of the world’s fastest growing areas for venture capitalists. In the consumer sphere, fintech can encapsulate PayPal, Apple Pay, or even using your credit card to purchase goods online. For business and enterprise, however, systems have helped to transform banking in a cost-effective manner, and has been projected to reduce costs by up to 69% for asset and wealth managers.

Indeed, the fintech market is predicted to be worth $212.1bn by 2021 – up from £156.4bn in 2016. Amid this industry success, however, uncertainty approaches. Britain has now fully committed to leaving the EU with the triggering of Article 50, and negotiations are proceeding apace. The UK will almost certainly complete this transitionary stage by March 31st 2019 at the latest.

Many industries are now seeing the effect of this challenging political climate; the majority of which are grappling with an exacerbated skills shortage – increasing the number of permanent placements made, in tandem with an associated increase to pay rates.

So, has fintech followed suit and suffered under Brexit? You’d be forgiven for answering in the affirmative.

In February of this year, it was reported that fintech companies were undertaking an exodus from the UK – “dashing the government’s hopes of building the UK into a world leader for the industry”. Whilst Simon Black, chief executive of PPRO Group, advised that “I don’t know of a licensed fintech company in the UK that isn’t looking at options”, these “options” have in fact resolved as satellite offices in alternate countries to ensure operational consistency.

Investment, then, has boomed. Indeed, it has now reached $1.4bn in Q2 of 2017 – up from just $0.1bn in the same period for 2016. Speaking in a KPMG report into the future of fintech amid Brexit, Murray Raisbeck, Global Head of Fintech at KPMG, confirmed: “The outlook for the UK is especially exciting as we wait to see just how much innovation Brexit will drive. As banks, insurers and asset managers reassess their business models, they will need innovative tech solutions for everything from establishing a new office to engaging with staff and customers.”

Fintech, both start-ups and existing firms, are set for a record-breaking year of investment – fully defying predictions that London was set to lose its crown as the fintech capital of Europe. In Q3 of 2017, investment in fintech hit $1.8bn across 2016 deals – with the UK securing half of total investment, and eight of the 10 largest deals for the period. Fantastic news for the rising number of specialist start-ups in the UK.

Brexit has indeed influenced investment into fintech for the UK. Defying initial predictions, however, the trend has been overwhelmingly positive. With Brexit set to occur late in Q1 of 2019, fintech specialists and financial services organisations will soon be required to firm up their strategies for mitigation. Against this predicted backdrop, the sector looks to be an overwhelmingly positive, lucrative, proposition both for those looking to enter and carve out a long-term career for themselves and those already working within the sector.

If you’re interested in further developing your career in Financial Services, or are simply looking for more information on the nuances behind this burgeoning industry, the Heat Recruitment team is here to help. Get in touch!