Fintechs show appetite for growth despite market anxieties

Survey shows fintechs are optimistic as Brexit uncertainty looms and pandemic continues to shape outlook

By Leanna Reeves | 24 September 2020

The pandemic and upcoming negotiations around Brexit are causing unprecedented uncertainty for fintech market participants, but many are still seeking to expand internationally, according to research conducted by Newfound, seen by bobsguide.

The study – which was produced in July and surveyed 50 fintech executives - revealed that 68 percent of fintech executives expect to expand internationally in the next 18 months whilst only two percent said they wouldn’t expand anytime soon.

“It's almost a double-edged sword here because there's no doubt that if we look at Brexit in isolation, there is a degree of nervousness for fintechs about the ability to do business in Europe, particularly for overseas markets looking to come into the UK and use it as a landing pad,” says Peter Gillingwater, CEO at Newfound.

“Certain areas are under pressure because there’s oversupply or overcapacity. Whilst payment is a high growth area, there’s a lot of players so ultimately it depends upon what your application or solution set is. But coronavirus has driven lots of activities online and large enterprises and banks have had to adopt new ways of managing their processes or systems.”

Gillingwater believes this year’s crisis and Brexit have created uncertainty as well as opportunity – in which Fintechs are now looking at the UK marketplace and Europe as a place for growth. As more organisations need to make sure they are compliant, regulatory technology is also expected to go through significant development.

But while the fintech industry is expected to stay robust amid the crisis and Brexit negotiations, which comes as good news for the European market, Fintechs say the government could do more to support international firms.

42 percent of those surveyed said that tax breaks and support programmes could help the UK become a more attractive destination for global Fintechs, making it easier to plan expansion.

The government provides good services to help companies understand the marketplace, but it fails to provide real financial incentives or financial inducements, according to Gillingwater.

“You can have R&D tax credits if you’re an oversea company, but by large, all they’re doing is dressing up the shop window as opposed to showing around the shop in a more meaningful way,” he says.

However, the UK still presents an attractive hub for the industry.

“If you've got specific solutions or applications that help companies manage themselves better, then it’s fair to say the UK Government has created an opportunistic marketplace. There's plenty of opportunities here although it’s competitive as well. If you're serious about FinTech as a vendor then you have to look at the marketplace here or you’ll be missing out of potential opportunity,” says Gillingwater.
More than half of executives expect growth to be modest in the UK with a gradual increase over the next year, according to the survey.

Gillingwater also expects 2021 to be a significant year for fintech maturity and growth.

“Brexit is going to trigger a lot of situations which may well be great opportunities. Overseas governments are investing heavily into their trade teams in the UK, so they’re gearing up for growth as well. You’ll see an increase in activity, provided coronavirus doesn’t return with a vengeance.”

 

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