PM calls on fintech to lead tech revolution, as figures show fintech dominating tech investment

Boris Johnson yesterday called on UK fintech to be at the forefront of the next tech revolution, as new figures showed fintech dominating UK tech funding this year.

The upbeat assessment of fintech—and tech—by the prime minister came as the capital’s flagship tech event, London Tech Week, kicked off with fintech luminaries including the co-founders of Wise and Klarna both speaking.

The new figures from the UK Digital Economy Council reveal fintech funding to be burning bright in the UK.

In total, UK tech companies have raised £12.4bn in the first five months of 2022, more than the whole of 2020, which puts the UK ahead of China and second only to the US.

And it is fintech which is powering ahead, raising £6.2bn in the UK since January, and representing 72 per cent of UK tech investment overall.

“Great Tech Revolution”

The prime minister, who attended London Tech Week, tweeted: “The Great Tech Revolution is transforming our world and I want the UK to be at the forefront of this advance.

The Great Tech Revolution is transforming our world and I want the UK to be at the forefront of this advance. Looking forward to meeting many of the leaders in tech later to discuss how we are making this happen – growing the economy and boosting jobs.https://t.co/HLSJPvTycp

— Boris Johnson (@BorisJohnson)

Culture secretary Nadine Dorries tweeted that the figures showed a “huge vote of confidence in the talent behind great British tech and the innovative, competitive market which exists here in the UK”.

In his opening address to London Tech Week, chancellor Rishi Sunak spoke of his affection for startups, a speech which would likely be music to the ears of fintech leaders.

Chancellor fan of startups

Sunak said: “I had the privilege of living, studying, and working in California. 

“That experience left a lasting mark on me. I lived and breathed the culture that was adventurous, optimistic, and forward-thinking. 

“Willing to take risks. To be imaginative. To build new products, services, businesses that could change the world.”

The chancellor went on to say the UK had “distinctive strengths in fintech” and highlighted that the UK has created more tech unicorns than any other country, bar the US and China.

Examples include Checkout.com,GoCardless,Lendable and Monzo, all of which have head offices in London.

He also referenced the UK’s pioneering regulatory approach in areas like the FCA’s regulatory sandbox (for cutting-edge financial products), open banking, and regulatory frameworks in crypto and blockchain.

The chancellor said the UK was not only a magnet for funding, but also offers favourable regulation and access to talent for UK and overseas companies and startups.

“If you come to the UK, we will back you to succeed. Nothing like that exists anywhere else in the world,” he said.

UK Digital Strategy

At the event, the government unveiled its UK Digital Strategy, which it said “brings cross-government tech and digital policies together in one unified roadmap for ensuring digital technology, infrastructure and data drives economic growth and innovation in the coming years".

It said the initiative will lead to new jobs, skills and services that benefit and level up the whole of the UK. 

One part of the initiative will see tech leaders come together in a new Digital Skills Council to tackle the skills gap.

Challenging time for fintechs in UK

The upbeat message about fintech by the government comes as some fintechs operating in the UK face a difficult time amid tough economic circumstances.

Klarna,Curve and Freetrade have all recently made significant job cuts.

But Russ Shaw, founder of Tech London Advocates & Global Tech Advocates. and one of the founders of London Tech Week, said fintech would find ways to “navigate” the economic challenges.

He told AltFi: “The global economy is facing a crunch point, and no sector is immune. It’s always difficult to see companies having to cut jobs but I have no doubt they will bounce back. 

“These are resilient, innovative companies, with an entrepreneurial backbone at their core – and they will find a way to navigate around the current economic challenges.”

Fintechs facing diversity challenge

However, Shaw said fintech still faced a diversity challenge, a long-standing issue, which includes a dearth of female leaders, which the industry is trying to address.

He said: “The diversity challenge is something the sector [tech] is facing across all verticals – and fintech is no exception. 

“In fact, you could argue that with fintech being the jewel in the UK tech crown, and many prominent fintech companies achieving new levels of maturity by reaching public markets, it’s particularly important they diversify their teams. 

“Fintech has in many ways led UK tech growth over the past decade, and it’s critical this leadership is also reflected in strong levels of diversity and inclusion.”

Shaw said 2022 would mark a “minimal downturn” in fintech investment in the UK, compared to 2021’s record year.

He added: “Fintech remains London’s strongest vertical and the one bringing in the highest levels of capital. 

“Overall, it’s in a strong position as levels of digital adoption continue to grow in the aftermath of the pandemic. 

“While 2021 was a record year in terms of investment levels, we can expect only a minimal downturn as the sector continues to grow from strength to strength – particularly as areas such as crypto reach new levels of maturity and more established players look towards listing on the public markets.”

Klarna boss on future of banking

Along with the chancellor, Klarna CEO and co-founder Sebastian Siemiatkowski and Wise chairman and co-founder Taavet Hinrikus also spoke at London Tech Week on the first day.

Siemiatkowski, the CEO of Klarna, most known for his buy now pay later product but which has a European banking license, hit out at traditional banks for giving savers “as little as possible” and likened a forthcoming banking revolution to that of the arrival of self-driving cars.

He said: “What I believe and what I have believed for a long time is that someday in the future, you wake up in the morning your financial digital assistant says ‘hey, I've analysed your mortgage.

"'Tonight I realised it could save you 10 pounds a month on your mortgage by shifting from supplier A to supplier B. And the only thing you need to do is say yes.’  

"It's a little bit like self-driving cars. I don't know when it's going to happen, but I do know it will happen.

"So the future of banking is very different to what we've traditionally seen where banks had been obsessed with what they call ‘maximising interest rate spread’, which means, giving savers as little as possible and charging borrowers as much as possible.

"The true future of retail banking is somebody's on the consumer’s side, trying to help them save time, save money, make them less worried about their finances. This is enabled by technology. It is technology which will make this new world possible."

Meanwhile, Hinrikus spoke about how the rest of the world can learn from Estonia about tech significantly boosting GDP levels.

Amazon launches new fintech accelerator

Also at London Tech Week, Amazon announced that its cloud service division Amazon Web Services (AWS) was launching a new fintech accelerator in the UK geared to supporting UK companies to build innovative solutions in the cloud. 

The six-week programme will give access to AWS cloud technology and credits, as well as mentorship, training, connections, and the technical guidance necessary to build both innovative solutions in the cloud, and successful companies, Amazon said.