The UK has long billed itself as the friendly home of fintechs (financial technology companies), which covers everything from money transfer apps to open-source banking and payments and supply chain finance. UK fintechs are not subject to any specific legal regulation, except where their activities fall under the responsibility of existing financial regulators.
According to KPMG, around 2,500 of these companies have established themselves in the UK, with an increasing upward drift through the funding rounds towards market listed status. In contrast to other sectors where venture capital and private equity has largely left the scene, fintechs have continued to attract decent levels of investment. According to trade statistics, the UK’s fintech industry raised the equivalent of $9.1bn (£7.9bn) in the first six months of this year, compared with $7.3bn during the same period in 2021, which itself went on to become a record-breaking year. So, despite the industry’s growth, why are investors currently wary?
The fintech industry endured a torrid summer as questions were raised about a series of companies suddenly struggling with questions over their accounts or dealing with failures to implement money-laundering protocols in certain markets. In other words, the capital intensive, and mainly loss-making business model, is suddenly less in vogue with investors who are wary of debt-laden companies at a time of rising interest rates, but there is also a sense that growth has been helter-skelter and management control sometimes lacking.