Fintech and its increasing popularity in London

Kingly Brookes, May 26th, 2015 Kingly Brookes

The fintech world

Fintech (financial-technology) is tech that is applied to financial services to create new business models and inclusive products. Paypal, Stripe, Square and Mint are examples of such disruptive financial technology applications. The rate of increase in the market has been exponential. Simplification, collaboration, transparency and the democratisation of financial services are at the heart of the fintech industry; the benefits to consumers are huge, as are the implications for businesses. The full extent to which incumbents such as banks and other established financial services companies will be affected is far from clear. What is obvious is that breakneck innovations in spaces as diverse as payment processing, transfers, fraud reduction, peer-to-peer lending, cryptocurrencies and stock trading are drastically changing the landscape and impacting existing business models.

 

The rise of fintech in London

It is no ‘accident’ that London is the epicentre of a global fintech boom. Accenture’s 2015 publication, The Future of Fintech and Banking, reports that investment in fintech companies grew by 201% to $12.21 billion globally in 2014 while overall venture-capital investments saw growth of just 63%. In their 2014 Industry Report called “Landscaping UK Fintech”, UK Trade and Investments stated that fintech currently generates £20bn in revenue annually.

London is a prime fintech incubator for three commonly cited reasons: 1) The excellent existing financial services infrastructure, 2) Access to talent, and 3) Geography — London’s key advantage has always been its geographic and time-zone location. Banks trade with Asia in the morning and with the US after lunch, a convenience that has led to many being headquartered in London. There is another less-cited reason that London is the global fintech hub, Fintech is a priority policy area for the UK government. Consequently, the UK has a benign, supportive regulatory and tax regime for start-up businesses, and a favourable environment for fintech entrepreneurs. These concessions act as a catalyst for growth.

 

Ahead of the curve

Clearly there has never been a better place-time for a London-based start-up, particularly a tech start-up, than right now. There is a great deal of buzz around the industry – investors are effusive and opportunities abound. Yet survival for more established companies is complicated by a more ‘convoluted’ landscape. They face huge hurdles in rolling their legacy systems and rigid operational structures into more fluid business models. Big banks in the UK are already sinking large reserves into the new spaces, by investing and partnering with financial-technology startups. But no company will be left unaffected. Even the freshest and most agile will be challenged by the increasing complexity. Along with the new opportunities and flexibility ushered in by fintech comes a daunting range of shifting compliance, accounting, financial management and tax implications. The UK’s regulatory frameworks are constantly evolving. To stay ahead of the curve, navigating them with expert help is more important than ever before.

 

How we can help

Here at Kingly Brookes we help ambitious technology companies to manage their finances in a tax-efficient manner and take advantage of government schemes such as the R&D Tax Credits scheme and the Patent Box regime. Partner John Moore specialises in helping technology companies to take advantage of these schemes. In the last two years alone he has helped his clients claim over £45 million in R&D tax credits. To find out more about how John can help your business you can call him on 0207 292 8850 or email John.Moore@kinglybrookesllp.co.uk.