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Is UK Fintech suffering from a confidence crisis?

The UK’s fintech landscape has evolved significantly since it first stepped into the limelight nearly a decade ago. By challenging the status quo, a new breed of start-ups took the latest technological developments and applied them to a traditionally staid finance industry. Their fintech solutions sparked a disruptive movement fuelled by mass consumer and business adoptions. The UK rose to prominence as a global fintech hub, accommodating scaling companies now considered key enablers of fintech innovation.

Move forward to 2024, and we find fintech wrestling with macroeconomic trends that have put UK companies under immense pressure. For several scaling fintechs launched in the last five years, high inflation, interest rates and an upcoming general election have impacted their commercial prospects. Investors are more risk-averse, limiting their capital injections to companies that are generating revenue and in stable positions. Rather than backing hype, investors have gravitated towards fintechs that are stable and pursuing a sustainable growth strategy, particularly for companies progressing through the private fundraising stages.

As the UK’s fintech market matures, the discussion has also turned to established fintech brands looking to go public and effectively kickstart an IPO boom on the London Stock Exchange (LSE) – a stock market that has suffered numerous listing setbacks. The UK’s collection of neobanks have been positioned as likely candidates. A listing on the LSE would demonstrate the country’s ability to support startups from inception through to eventually going public. However, a wave of fintech listings are not guaranteed.

UK neobanks are struggling to deliver profit, with some also encountering regulatory and license challenges which are hindering their growth potential. This could change in the coming years, but it would require a drastic change in current market conditions with fintechs finding new ways to scale-up, increase their customer base and ultimately deliver profits.

An industry running out of steam?

The question beckons – has the UK’s fintech industry run out of steam? In one respect, it is unfair for us to expect the industry to maintain the same level of activities witnessed at the beginning of the fintech movement. The reality is that industries need to consolidate. Fintechs are new entities that are challenging the mainstream practices of legacy institutions. Banks have responded to challenger banks by adapting their services and ensuring they are equally pursuing new, tech-enabled services for their customers.

One thing is for certain – the UK’s fintech boom has completely changed what clients expect, and indeed demand, from the banking industry. Fintechs arose in reaction to the lack of innovation taking place by banks. As a result, 86% of UK consumers are using digital apps and services to manage their finances. Such innovation must continue to evolve as customer demands change, and fintechs are best positioned to lead on this.

Importantly, the growth prospects for the fintech industry look promising. There are over 1,600 fintech firms in the UK, with this total number set to double by 2030. Fintech is a foundational sub-sector of the wider tech industry, contributing approximately £11 billion to the economy and delivering over 76,000 jobs.

Communicating for growth

Fintech is not a static industry. Its ability to adapt and respond to market trends have been core ingredients to its success. Like all sectors, it is feeling the pressure of factors that are beyond its collective control. However, there is good reason to expect a bounceback over the long-term, from a new generation of scaling fintechs introducing new solutions to market through to established brands entering the latter stages of cyclical growth.

The role of PR and comms in all supporting commercial targets is important. Increased competitiveness amongst challenger brands has meant that companies need to have a clear and identifiable brand that stands out. On top of this, we are seeing new innovations taking place in the B2B space, reflecting a marked shift from B2C.

Ultimately, there is an important role for fintech to play for the UK. Companies must ensure they are championing their successes and adapting to the demands of the market, while effectively communicating to their desired target audiences. Doing so will demonstrate why the UK’s fintech industry is less about hype, and here to stay.

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