Financial technology (FinTech) has rapidly reshaped the global financial service industry. FinTech is loved as it simplifies transactions, enhances security, reduces costs, and enables innovation. Emerging economies such as Africa, China, India, and Indonesia are taking a huge role in driving the growth of fintech, with some of the world’s largest fintech firms found in these countries.
The UK has had its fair share of success, with various FinTech startups paving the way. A combination of several factors contributes to the growth of the fintech sector. This article analyses the key trends influencing the UK fintech sector in 2024 and beyond.
Increased Funding
The UK ranks second in fintech investment globally after the US and is number one in Europe. With over 2600 firms operating in the country and employing over 70,00 people, the fintech sector in the UK is poised for a remarkable transformation and growth between 2024 and 2030.
The revenue from UK fintech firms will grow three-fold in the next five years, according to McKinsey, a research firm. Fintech companies are projected to double by 2030 and hit the £380 billion market value.
AI-driven Data Intelligence Solutions
Artificial Intelligence has taken the technology space by storm, with the fintech sector harnessing AI’s unlimited benefits to enhance its services.
The AI-powered data intelligence solutions will form a crucial part of fintech operations by enhancing decisions and mitigating risks. Predictive analytics by AI will help fintech companies in asset management, risk assessment, and portfolio management.
Financial institutions increasingly apply AI to analyse big datasets and gain insights into customer behaviour and preferences, market trends, and investment opportunities. In 2024 and beyond, AI-driven data intelligence solutions will define how fintech services are offered and consumed.
More Players and Increased Consumer Adoption
Fintechs have increased the accessibility of finances to the masses. Thanks to democratising financial services, customers can now manage their finances more straightforwardly, transparently, and engagingly. These privileges will pull more people to consume fintech services.
Incore Invest Board Director Nicolai Chamizo believes more people will continue joining FinTech. We haven’t started scratching the surface of what this sector offers.
The exponential increase of fintechs in the UK will continue attracting a diverse pool of talents keen to tap into this opportunity-laden sector. More women and minority groups will continue to contribute immensely towards the growth of fintechs in the UK.
The effects of Brexit will be on Display.
The UK’s decision to exit the European market in 2016 has created problems for British fintech in accessing the regional market and attracting talent. Fintechs from other markets might start seeing post-Brexit as a smaller and non-competitive market, hence opting for other countries.
These factors may lead to low growth of the UK fintech market compared to other economies. The inability to attract top talent may also reduce the competitiveness of the country’s fintech firms on the global stage.
Confusion in regulation space might be felt in the UK fintech sector
Players will ask whether to continue with EU laws or revert to UK laws. European regulations like the Markets in Financial Instrument Directive (MiFID) and Payment Service Directive will be less relevant to the UK fintech market. Such uncertainty can negatively affect the sector.
Uncertainties are likely to ease up
Market uncertainties have risen over the past few years; the Russia-Ukraine conflict and the resultant ban on Russian businesses pressured the UK’s economic system.
The outlook of fintech companies in 2023 was not the brightest. Rising Inflation and interest rates made it hard for startups to raise capital. Regulators were also in fintech’s case to adhere to the traditional know-your-customer protocols, especially in crypto. The implosion of the FTX crypto exchange sent shivers to investors. Lastly, Silicon Valley Bank’s collapse in March 2023 worsened the bad situation.
As interest rates ease and measures are taken to address investors’ fears, startups can now access affordable funding, and market uncertainties are reduced. These, among other factors, will fuel more investment in the sector.
Conclusion
The UK fintech sector has had remarkable success in recent years, with the story poised for continuity in the future. More opportunities are bound to emerge in this market, attracting investments and collaboration.
