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How has London established itself as a leading fintech hub?

24th November 2017
By Dan Lamyman
Co-Founder & Director
Business Intelligence & Advanced Analytics

London boasts one of the world’s largest financial services sectors. Of the 50 top FinTech companies identified by the 2017 FinTech50 guide, 31 were London-based. Despite the continuing uncertainty over Brexit, London remains a beacon in the financial technology space, with all signs pointing to this dominance continuing well into the future.

What gives London an advantage over other potential hubs?

It is a combination of several golden factors that, whilst in evidence individually across the globe, are abundant in London in a way that is both unique and powerful.

1. Talent

Firstly, the diversity and wealth of talent to which the city is home. High salaries, a good standard of living, good public services, and a buzzing, lively environment are all hugely attractive to talent from all over the country and abroad. It’s estimated that nearly 40% of London’s working population was born abroad, with a great deal of this number coming to the city to enjoy a career in the thriving FinTech industry.

2. Demand

Of course, without demand for FinTech, there would not be the jobs that people flock to the city for in the first place. London has the highest concentration of banks, insurance companies, and other key financial institutions, many of which are in dire need of innovation to escape the bind of outdated systems. Then, there’s all the growing FinTech startups themselves, all of which demand a continuing influx of leading talent to keep expanding.

3. Investment

Investment is key to London’s success. Last year, £820 million of the UK’s £936 million FinTech investment went to London alone. London’s AI and machine learning companies, in particular, have become hugely attractive to investors, bagging over £207 million in venture capital investment over the last five years. Venture capital investment and access to liquid capital markets comprise the recipe for these stunning figures, with such ready investment opening doors for new FinTech startups to grow and succeed.

4. Policy 

The UK has long championed innovation and the growth of new enterprise. Investment schemes such as the SEIS and strong support from the FCA, as well as ardent government backing, including tax incentives, all help foster and encourage FinTech startups. This support is arguably the key contributing factor to making London the FinTech hub that it is, perhaps over and above any other factor.

Machine Learning & AI in Fintech

Additionally, developments in machine learning and AI pose another item to add to the list of success factors for London FinTech. Companies such as DeepMind, which was founded in London in 2010, and acquired by Google in 2014, is perhaps the brightest light in the London AI scene, but it is certainly far from alone. Without exaggeration, all of FinTech relies on vast pools of data, which is necessarily reliant on sophisticated machine learning systems to be made useful. Without AI working at the forefront of FinTech, the thriving industry would scarcely exist.

There is famously a global shortage of appropriate talent to fill necessary roles in machine learning and AI in general. But as I’ve mentioned above, if that talent is available anywhere, it’s London. The talent pool, especially coming in from the UK’s world-leading higher education system, powers AI/ML development, thus directly impacting FinTech.

Facebook chooses London for Messenger payments rollout

Very recently, Facebook Messenger announced its move to expand the geography of its own FinTech innovation. The social networking giant has introduced the ability for users to send and receive money through in-app conversations. By adding a payment card to their account, money can be sent across to contacts almost instantaneously. And where has Facebook chosen as its first location outside of the US for the roll-out of this new service? The UK, of course.

Bearing in mind everything discussed above, it’s fairly obvious why Facebook, one of the leading lights of the tech industry, has decided on the UK for its FinTech debut. London is prime territory for the product, principally because of the fact that our thriving FinTech scene makes the population uniquely receptive to new financial services products. We are ready in a way that competitor nations just aren’t yet.

Beyond London…

London may be the heart and soul of FinTech right now, but it’s important not to blinker ourselves towards thinking London carries the entire industry alone. Other cities in the UK are proving themselves to be major FinTech hubs in their own right. Manchester is the main one; its enormous regeneration over the last few years seeing an emergence of a thriving tech scene that rivals that of the capital. With many of the same factors that have driven London’s FinTech success, it’s very strongly anticipated that the UK’s second city will stand beside the capital in powering the UK’s future as a financial technology giant.

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