Innovate Finance,
Streets Consulting and
Whitecap Consulting have published the ‘Scaling UK Regional FinTech’ research report. The new, unique study, born from the collective expertise of the three organisations deeply embedded in the UK’s FinTech ecosystem, provides valuable insights into accelerating the growth of regional scaleups* based outside of London and the South East.
The research project, undertaken by Whitecap Consulting and co-published with Innovate Finance and Streets Consulting, was designed to answer a fundamental question for the FinTech industry and the wider UK economy: How do we enable more FinTech firms to successfully scale up in the UK?
The ‘Scaling UK Regional FinTech’ research report delves into the growth and development data of 250 of the UK's regional FinTech scaleups outside of London and is supported by interviews with leaders and entrepreneurs. It reveals the challenges and opportunities FinTech scaleups face as they grow, navigate the current economic climate and strive to bring the innovation and growth that the UK economy needs.
Background
According to the latest data published in the Kalifa Review, UK FinTech accounts for 10% of the global industry, comprising around 2,500 UK companies. The Kalifa Review also stated that by 2030, FinTech’s direct Gross Value Add (GVA) contribution to the UK economy is predicted to reach £13.7bn, with job creation contributing to 70% of this value.
The UK attracts more FinTech investment than the rest of Europe combined and is second only to the United States, according to the latest investment report by Innovate Finance.
Data from the Department for Business and Trade shows a UK FinTech industry currently employing some 76,500 people across the nation, which by 2030 is expected to grow to around 105,000.
Six of the top 10 fintechs ranked by Fintech50 have headquarters in London.
As recently as the Autumn Statement 2023, the UK Chancellor announced a series of measures to support high-growth innovative FinTech companies in the UK which struggle to raise scaleup capital.
In order to support the UK in its aspirations to grow the UK FinTech scaleup sector and maintain the UK’s current position as a global leader in FinTech, Innovate Finance, Streets Consulting and Whitecap Consulting sought to understand the lessons that can be learned from FinTechs located outside London and the South East, all successfully scaling today.
Report Findings:
People
- Firms with female founders achieved over 30% more turnover growth than those with male only founders - yet only 16% of firms had a female founder.
- More than half of FinTechs had more than one founder; the average age of all founders is 38 years old.
- The more founders, the higher their revenue growth rate (companies with up to 4 founders were part of the study).
Finances
- Raising investment correlates to higher employee and revenue growth, but revenue grows at a proportionally lower rate.
- 9 out of 10 firms that attended an accelerator went on to raise funding.
- Firms in Payments and WealthTech account for the largest number of scaleups, but PropTech firms are most likely to successfully raise funding.
Market
- 87% of FinTechs analysed have a B2B element to their go to market strategy, compared to 30% B2C (16% have both).
- On average, B2C firms that obtain funding achieved double the revenue and employee growth of B2B only firms.
- Firms in Lending, Banking, InsurTech, Money Management and WealthTech enjoy the strongest revenue growth.
Recommendations from the report
Based on the analysis and interviews undertaken during the research report, the evidence suggests the following actions would help create more FinTech scaleups across the UK:
For entrepreneurs:
1.
Vocation, not location. What you do and how you do it will define your success, not your location.
2.
Don’t go it alone. FinTech firms with multiple founders are more likely to successfully scale.
3.
Ensure gender diversity. Firms with one or more female founders outperform male-only founder teams.
4.
Join an accelerator. Companies which were part of an accelerator raised investment more successfully; the coaching, guidance and contacts within accelerator cohorts can provide assistance as organisations scale.
For investors, policymakers and the wider FinTech sector:
1.
Think nationally. Our analysis shows that location doesn’t matter, although being in a city has a positive impact on growth.
2.
Reduce risk for entrepreneurs. More support is required in terms of tax relief schemes and access to funding.
3.
Encourage diversity in FinTech leadership. More initiatives are required, building on the new government taskforce to create dedicated funding for female-founded businesses and to provide support for other challenges faced by female entrepreneurs.
Janine Hirt, CEO of Innovate Finance, said: “We are delighted to partner with Whitecap and Streets Consulting on this important piece of research providing insightful advice from FinTech scale ups and recommendations for policy-makers. The report tells the inspiring story of FinTech innovators across the UK, showing their incredible contributions and determination to grow successful businesses and drive so much positive change for a more democratic, transparent and inclusive financial services sector that benefits both consumers and businesses alike.”
Julian Wells, Director & FinTech Lead at Whitecap Consulting, said: “We’re delighted to present these findings to the FinTech community and we’re proud to work with Innovate Finance and Streets Consulting to make this happen. The research highlights some fascinating and surprising trends, but also contains valuable advice from those founders who have ‘been there and done that’ in terms of creating and growing new FinTechs. The main message for us from this report is that in today’s world where you scale a business is nowhere near as important as how you scale a business.
He added: “What is not a surprise to us, is to see so many regional FinTech innovators succeeding outside of London - there is an extremely vibrant ecosystem of FinTech innovators across all four corners of our nation. These are exactly the kinds of data and insights which can help shape the UK’s effort to maintain its position as a true leader in global FinTech.”
Julia Streets, CEO of Streets Consulting, commented: “It’s tremendous to have partnered with such prestigious FinTech industry experts to produce this report, which shines a bright light on the opportunities and challenges facing our regional FinTech scaleups. We see these stories day in, day out, as we advise our clients and coach with incubators in this important sector for UK economic prosperity. The opportunities are exciting and vast for the UK to continue to lead as innovators in global FinTech and we’re passionate about supporting that growth and transformation.”
She added: “The data on diversity from this report is bitter-sweet. Once again we see the benefits of diversity and inclusion, since FinTechs founded by women significantly outperform those founded by men; but once again we see the size of the challenge, as fewer than a fifth of FinTech firms are founded by women.”
The Scaling UK Regional FinTech Research Report is available to download here.
Universe of Study
To create a study robust in its methodology and accurate in its insights, the report’s authors gathered information on 250 UK FinTechs based outside of London, spanning many different regions and analysed the data thoroughly. Additionally, deep-dive one-to-one interviews have been conducted with 10 FinTech entrepreneurs from some of the UK’s main FinTech regions, to give an even deeper insight into the circumstances and experiences that sit behind some of the highest growth FinTech firms in this exciting UK innovation success story.
- Definition of ’Scaleup’ - Firms that have reported revenues above £632,000 (and less than £25m) using Companies House data. This is the primary measure from which the research has distinguished these firms from the startup community.
