Fintech outside London – part 1

Is there fintech life outside London? Yes, there is. And it is vibrant!

There is no smoke without fire. The “big smoke”, as London is colloquially known, has been creating a fire of innovation in the financial technology space for years, but there are other UK fintech centres in the Southwest; Cardiff; Manchester/Leeds; and Edinburgh/Glasgow that create their own heat.

Neil Ainger, Banking Technology’s editorial contributor, investigates the pros and cons of fintech outside London.

Reading the UK news you might think fintech innovation only comes from limelight-hogging London, but that isn’t the case. There are obviously other rival global centres of innovation like Berlin or Stockholm, but many other regional UK fintech hubs exist too.

This report (consisting of a series of articles) will look at UK fintech firms working outside of the so-called “London bubble”, examining where they are based and why; their history; target markets; clients; tech specialisations and future plans. It will also look at any concerns these regional UK fintech firms and hubs might have about training, or attracting talent or publicity away from the UK capital.

There are many examples of successful non-London fintech firms. One such is Atom Bank, a challenger bank that is seeking to use technology to change the way retail banking is done and win customers over to its mobile-based, digital platform. It is based in Durham in the northeast of England. The crowdfunding business Crowdcube came out of Exeter in the Southwest of England.

Fintech as a term can encompass disruptors like Atom Bank and older core banking system providers and other such enabling firms – after all, it existed before it was a hashtag. The term is used in this article in its broadest possible sense, although naturally there is a propensity towards focusing on the nimble fintech start-ups that have become associated with the abbreviation, and which are now largely doing the innovative development work that banks’ used to do themselves in-house.

Depending how you define fintech it can include finserv processing practitioners working on the back-end to improve customer service, on-boarding, efficiency or compliance end uses – often overcoming legacy IT issues and silos – through to front-end app developers that are effectively doing innovative R&D on an outsourced arms-length basis for financial institutions (FIs).

Some firms are seeking to disrupt or displace retail or investment banks, insurers, and traditional business around loans, foreign exchange (FX), remittances and so on, while others want to co-operate with FIs, be enablers, or simply be bought out for their good idea. Fintech is a many-splendoured thing, encompassing many different technologies, and it is spread all across the UK. Software developers, data scientists, user experience (UX) creatives, financiers, venture capitalists (VCs), lawyers and others are all part of the ecosystem.

“There are numerous growing regional hubs of technology excellence across the UK, which are bringing various solutions to market that are relevant for banks and FIs,” says Ruth Milligan, head of the techUK trade body’s financial services and payments programme.

“In fintech, Edinburgh is the UK’s second largest financial centre due to its status as an asset management hub and the strength of its academic institutions. It has plans to open a new Edinburgh fintech hub in May 2017,” says Milligan, citing the Entrepreneurial E-Spark facility that is expanding at RBS’s Gogarburn HQ in Edinburgh as an example of regional activity.

RBS, the UK government and other bodies, such as KPMG Enterprise and Dell, are also supporting a nationwide rollout of similar E-Spark hubs in other major UK cities like Glasgow; Bristol; Birmingham, where the first E-Spark “hatchery” began at St Philips Place in 2015; onwards to Leeds; Manchester; Cardiff; and Belfast.

Barclays is also a keen supporter of the fintech revolution and many other banks invest in it too, such as Santander’s InnoVentures, either to make money or learn from new start-ups via collaboration or acquisition.

The “true believers” of fintech claim they’re not interested in collaborating. Instead, they want to replace banks or disintermediate their traditional offerings, leaving older FIs merely as “dumb plumbers” without valuable data or as utility-only services.

This feature examines both types of firms and a selection of UK fintech cities, in an effort to provide a snapshot of some key regional UK hubs and as part of an investigation into the fintech scene outside of London.

There are many incubators, accelerators and supporting organisations trying to spur on the sector in the UK, such as the local chapters of the Tech City UK Cluster Alliance and numerous mentoring programmes at universities up and down the UK.

Innovate Finance, which has a self-styled aim to be the single point of access to the UK fintech ecosystem also has a regional strategy, launched in 2015, despite being headquartered in London itself at the iconic Level39 technology accelerator at Canary Wharf.

The Rainmaking organisation and its Startupbootcamp series of accelerators around the globe also have a presence in the UK, as do many other programmes..
This is an excerpt. The full article is available in the April 2017 edition of Banking Technology.