The fintech sector’s success is built on speed: how quickly these companies have been able to adapt to the needs of institutions and customers, and deliver them through new digital technology. It’s a sector that’s still changing, fast, which presents both opportunities and challenges for the fintech businesses looking to scale. So what lies ahead for UK fintech – and how can the UK’s scaling businesses secure their success in changing times?
A bed of roses?
There are certainly many opportunities for fintech firms. The arrival of Open Banking at the start of this year has opened up traditional financial services firms to more competition. Fintech firms will be able to access banking data (with customers’ authorisation), which creates the possibility of developing whole new products and services over the coming months. This could even usher in a whole new age of banking.
There are also plenty of opportunities for collaboration. From HSBC to JP Morgan, many leading banks and technology firms have launched fintech accelerators to support start-ups in the space. And from a regulatory standpoint, Mark Carney at the Bank of England has signalled that the institution will work much more closely with fintech firms, with the launch of the Bank of England’s own fintech hub. All of this might seem incredibly positive for fintech firms looking to scale in the UK.
The pinch of salt
However, it would be wise to take this with a pinch of salt. The next 18 months could be tumultuous for fintech, as Brexit looms large on the horizon. There are many questions still to be decided in the final settlement, from whether financial firms will still be able to passport their services to the EU to whether the free movement of people will come to an end. This could make the pace of change in this fast-moving market even quicker.
The very success of fintech can also present challenges for scaling firms. Fintech is very much a “hot sector,” and indeed a noisy one. Headlines about new advances (and new fintech firms) in areas like artificial intelligence, blockchain and cryptocurrencies make the headlines every day. Small businesses are facing fierce competition, as much from each other as from existing financial institutions, as they look to develop their tech, grow quickly and secure their place in the market.
It’s a climate where investors are also keen to get their stake in fintech. Perhaps counterintuitively, this can create difficulties for firms looking to make their mark with investors, to secure the funds needed for growth at speed. All in all, the fast pace of fintech that has underpinned its success to date can also create its own difficulties for scaling firms.
Scale-ups, to your own selves be true
These are certainly tricky issues for scaling firms to navigate, and how firms approach these challenges will determine if they can stake out a lasting position in this lucrative area. Simply put, it’s more important than ever that leaders truly understand the purpose of their business, and build their growth and fundraising strategies around it.
Getting your message across to a room full of investors is admittedly tricky. It can be tempting to try to shout the loudest about the disruptive potential of your solution, in the hope of raising money and accelerating growth. However, focusing on being the “next big thing” above all else can see fintech firms overusing buzzwords, overstating their technology and even being unrealistic about their growth prospects. At best, it’s a distraction that may leave you chasing your tail; at worst, it could leave you in a tricky situation with investors further down the line.
Instead, scale-ups should focus on what is genuinely unique about their fintech solution. Not every innovation will entirely transform an industry; the most successful businesses are usually an evolution, rather than a revolution (think of Facebook and Friends Reunited). There can be incredible value in refining an existing model, applying technology in a new way or even serving a particular market niche – and this is where I predict many fintech scale-ups will find their long-term position. Leaders in growing businesses should embrace this fact, and concentrate on what makes them unique. Often the best ideas are the simplest, and authenticity will enable scaling businesses to cut through the noise of fintech.
Thriving through authenticity
Fintech is moving faster than ever, and with both threats and opportunities on the horizon, fintech leaders are likely to face many distractions over the coming years. Technological advances, fast-moving competition and even the changes to the marketplace prompted by Brexit. There will be many potential opportunities – and even potential red herrings – for fintech leaders ahead.
Amidst this noise, the real key to success in fintech will be authenticity. Understand your business’ niche and feed that into everything: your R&D, sales priorities, investor relations and fundraising, hiring strategy and even plans for expansion. Knowing your purpose, and being true to it, will determine which scaling businesses successfully navigate the fintech times ahead.