04 October 2016

With us magazine: London’s fintech hotspot


Chris Priestley

Partner | UK

Fintech is the collision of digital technologies with the banking and finance industry and it is big business. The UK leads the way in European fintech and it’s well on the way to world domination. At the heart of this amazing success story is Level39, the vibrant tech ecosystem that is fully established in London’s Canary Wharf. As a magnet for ambitious and exciting young companies, it’s helping to shape a new world of finance, banking and commerce, bringing together the best and the brightest of London’s finance and technology communities with spectacular results.

From Silicon Roundabout to Silicon Fen, Silicon Glen and beyond, thriving British tech clusters are setting the pace for digital innovation in technologies such as robotics, analytics, mobility and Big Data. Travel to London’s Canary Wharf, take the lift to One Canada Square’s 39th floor and you step out into another tech ecosystem that’s making headlines worldwide for its pre-eminence in cutting-edge financial technology.

Claire Cockerton, as co-founder of all three elements of this innovative fintech ecosystem, is a major figure in this field. Level39 (level39.co) is the largest fintech accelerator in Europe, ENTIQ (entiq.com) provides innovation solutions for businesses, and the Cognicity (cognicity.london) project is encouraging the development of smart city technology. In just two and a half years, this powerhouse has already attracted over 160 fintech, retail, cyber-security and smart city start-ups – and it’s the engine behind the UK’s emergence as Europe’s undisputed fintech leader. Claire was also instrumental in launching Innovate Finance, the UK’s fintech industry body which has provided a voice for the industry in fighting for its interests. Withers was proud to advise on the establishment of Innovate Finance and its governance.

Former UK Prime Minister David Cameron publicly backed the ‘Innovate Finance Manifesto: 2020’, which sets out three key ‘visions’ for the next few years. These include establishing the UK as the world’s most investment-friendly environment for fintech, attracting a total of US$8 billion of investment by 2020, and making the UK the premier location for 25 or more global fintech leaders.

The journey to world leadership

Achieving these goals is already well underway. Fintech currently generates £20 billion for the UK economy and directly employs 135,000 people. Claire picks up the story: “Canary Wharf Group’s long-term vision is behind all of these activities. Given the large group of international banks in Canary Wharf, the conglomeration of established banks and fintech innovators provides a virtuous circle of development.”

“Fintech was once described as a quiet revolution,” Claire continues, “and with the launch of Innovate Finance as the voice of the sector, it’s now making a lot of noise. The transformation it’s creating in the finance industry results in a greater choice for consumers andhas produced new challenger banks and technology providers.”

Momentum from all sides

The UK’s established banking sector has fed into fintech through its great base of knowledge, together with the movement of people from the banking industry starting up their own businesses as entrepreneurs. The impact of the financial crisis also played a big role in the emergence of fintech in the UK, as Claire explains: “The finance sector contracted across the board, leading to wide cuts at the banks and many people moving to challenger banks or taking the opportunity to start up their own businesses.”

“The aftermath of the crisis led to a big increase in regulation, increased capital constraints and compliance rules. Banks had to get better at dealing with their customers, who were increasingly demanding new technology services, and increased efficiency through the use of new technologies helped the banks to meet their compliance requirements.”

The sudden collapse in funding from traditional banks meant that business – especially young SMEs – sought alternative sources, creating an opening for new finance methods such as crowdfunding and crowdseeding to come into effect.

Claire says: “At the same time, consumers were largely disillusioned with the incumbent banks, and were happy to look at alternatives. Younger people, in particular, expect to deal with their finances in the same way they manage the rest of their lives – through apps and via their smartphone. Fintech has shone due to its multi-disciplinary approach; the sector has been able to draw on the UK’s creative, design and media strengths to present exciting new alternatives.”

Spotlight on growth and innovation

Growth in UK fintech has been driven by a combination of market demand and innovative new technologies. Examples include Nutmeg Wealth Management (nutmeg.com), Funding Circle (fundingcircle.com), and eToro (etoro.com).

Claire explains: “Fintech benefits from the great business environment in the UK, with tax incentives such as the patent box model and Collective Investment and Enterprise Investment schemes encouraging entrepreneurs to start businesses here. We’ve also got a friendly regulatory environment, with equity-based crowdfunding encouraged through a fairer treatment of crowdfunders; and of course, the UK is well-positioned geographically between the US and Asia.”

The big banks have been watching the emergence of fintech very closely. A number of them have joined Innovate Finance, and some have launched their own accelerators, set up corporate venture funds investing in fintech, or created partnerships with fintech businesses through which SME clients are referred to fintech finance providers.

Naturally, all of them are monitoring developments to see how they can use the latest innovations in their own operations.

New markets, new opportunities

So what are some of the latest breakthrough technologies in this sector? Claire highlights a selection, all of them homegrown in Level39: “Block chain technology for digital currencies, like bitcoin, is an interesting area. By providing a way of keeping these currencies safe and efficient, it’s helping to decentralise the exchange of currency and finance across market places – a trend that’s set to be one of the most disruptive developments in this sector in the next few years.”

“Data analytics and the management and visualisation of data is another very promising area. Some of the companies in Level39 are developing tools to manage information in completely new ways. Take cybernetics, for example: combining behavioural analytics and technology, it’s being used to help firms understand and manage how and why traders make decisions. As the field of data analytics develops further, banks will be able to get deeper and more granular insights into their customers that completely transform the way in which services can be personalised and made more relevant.”

It’s not just the core markets of banking and finance that are being transformed by fintech, says Claire: “Fintech is also likely to revolutionise the insurance industry by allowing peer-to-peer insurance models to develop. New aggregated products could be developed for niche groups of consumers who have been under-insured in the past.”

Thrilling times

Claire has made a global name for herself as a compelling spokesperson for fintech. It’s the latest stage in a journey that began in Canada where she founded a business in sustainable architecture, before becoming inspired to develop a business that’s all about helping entrepreneurs. “Nothing is more thrilling, challenging and heart-breaking than being an entrepreneur,” she sums up, “and nothing’s more rewarding than creating a better environment for start-up companies and helping them to flourish, as well as energising large corporations to act in entrepreneurial ways. It’s what we do at ENTIQ – and it’s what Innovate Finance and Level39 are all about.”

Category: Feature

Client types: Technology

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