A slice of the pie: UK financial firms target booming fintech market
As banks and financial services firms in the UK switch their attention from pandemic survival to driving growth, they are increasingly tapping into the booming fintech space as a way to future-proof their business, according to new research.
Almost half (46 per cent) of the UK’s financial services firms are targeting acquisitions and partnerships with fintechs in the next year, in a bid to to access emerging technologies and boost their product offerings, as consumer needs evolve post-pandemic.
That’s up from 32 per cent last year, according to the new data from Lloyds Bank.
Recent M&A deals include Natwest’s acquisition of children’s pocket money app RoosterMoney and Royal London’s acquisition of robo-adviser Wealth Wizards.
Of those firms planning fintech M&A, developing new products and services was the biggest driver of their plans, with 66 per cent citing it as a top priority. Improving client experiences followed at 53 per cent, followed by driving growth at 49 per cent.
“The UK has one of the most vibrant fintech communities in the world,” said Steve Everett, head of payments at Lloyds Bank.
“They are at the forefront of innovation within financial services and, by partnering with them, the UK’s largest firms are showing they are committed to developing new products and services to meet changing client needs through collaboration.”
Beyond M&A, three quarters (77 per cent) of the UK financial services bosses surveyed said that technology, automation and digital investment is a “top strategic priority” for the year ahead.
More firms expect to grow investment in their technology systems and core platforms over the next 12 months (77 per cent) compared to last year (62 per cent).
And it’s clear they see tech investment as a source of similar benefits, with the majority (71 per cent) planning investments to improve client experience, drive growth (60 per cent) and boost productivity (59 per cent).
“The pandemic is not over, but firms are now in a position to focus the lion’s share of their investment on growth and supporting clients,” said Adrian Walkling, head of financial services at Lloyds Bank.
“Innovation is the bedrock of UK financial services and will help the sector continue to lead the pack.”
It’s a theme that spreads further than London to corporates across Europe, where banks took part in a record 142 fintech deals last year, according to Pitchbook data.
There’s no indication of corporate venture capital slowing down across Europe this year, either, as banks have invested in 98 fintechs so far.
One of those most notable moves was Goldman’s £50m investment in the UK’s Starling bank in April this year.
And many banks have launched dedicated funds for investing in fintech startups. Barclays has been prolific in the UK< and most recently partnered with venture capital firm Anthemis to launch a $30m standalone fund for investing in London fintechs with female founders.
As a sector, fintech is driving the UK as a leading unicorn hub, and accounted for 11 of the 20 UK tech companies that reached a billion-dollar valuation in H1 2021.