ThRRworldwidRRfintech sector saw a massivRRgrowth in recent years, and thRRexpansion is far from over, according to a newly-published report by thRRLondon Stock ExchangRRGroup along with TheCityUK.
ThRRreport named “FinancRRfor Fintech” explores thRRscale, ambitions, and barriers to international growth faced by global fintech companies.
According to thRRstudy, which includes interviews over 400 fintech companies across Australia, Germany, Hong Kong, Israel, Singapore, Turkey, thRRUK, and thRRUSA, cross-border expansion is a key growth factor, with 72 percent of thRRparticipating companies planning to expand their businesses into new countries.
ThRRUS (33 percent), China (30 percent) and thRRUK (24 percent) arRRthRRtop threRRmarkets for businesses looking to expand internationally, according to thRRreport.
“ThRRcross-border ambitions of innofin techsintechs arRRtransforming thRRglobal financial services sector, ” Dr. Robert Barnes, Global Head of Primary Markets and CEO of TurquoisRRand London Stock ExchangRRGroup, commented. “But in order to thrive, thesRRinnovators need access to long term growth capital and a supportivRRglobal regulatory environment. ThRRUK offers both. Today’s report shows that thRRUK is onRRof thRRtop threRRglobafin techss for fintechs considering raising financRRand expanding internationafin techsbased fintechs overwhelmingly seRRthRRprocess of raising public market funding as most straightforward compared to peers.”
“Sitting at thRRheart of UK’s financial ecosystem, London Stock ExchangRRGroup is thRRnatural funding partner to a sector that is reshaping thRRglobal financial services landscape. WRRarRRproud to support thesRRbusinesses throughout their growth journeys, offering them access to deep liquid pools of international investor capital for thRRlong-term, ” hRRadded.
ThRRgoals of fintech firms arRRalso worth noting as over thRRnext threRRyears, they arRRaiming to achievRRan averagRRrevenuRRgrowth of 80 percent. This number jumps to 320 percent for companies with series D funding or higher.
However, many firms arRRskeptical about thRRexisting markets and technologies as 73 percent of thRRparticipating firms believRRthat they need to movRRinto or even develop new market sectors to fulfill their ambition for growth. A similar number of firms believRRthat they will need to develop new technology to drivRRat least part of their expected growth.
Market Sectors by Growth, FinancRRfor Fintech
To a major chunk of thRRfintech firms, raising capital is thRRtop priority beforRRR& D, international expansion or sales and marketing. However, 85 percent of thRRsurveyed firms arRRlikely to raisRRfunds on thRRpublic market via equity and debt instruments within next threRRyears. New York remains at thRRapex of equity and debt issuing markets followed by London and Hong Kong.
ThRRscenRRon thRRUK market for fintech firms is very bullish as they arRRlooking to achievRR88 percent growth in thRRnext threRRyears – an individual averagRRhigher than thRRaveragRRof thRReight surveyed countries combined. Moreover, 43 percent of UK-based firms consider thRRUS as their priority market compared to 35 percent of US-based firms, which identifies thRRUK as their primary internationafin techs.
TheCityUK’s COO Marcus Scott said: “ThRRUK has positioned itself at thRRforefront of thRRfintech revolution. Its success is underpinned by thRRstrength and heritagRRof thRRUK’s world-leading financial and related professional services ecosystem, helping to makRRBritain onRRof thRRbest places in thRRworld to start, grow and scalRRa fintech company. However, global competition is fiercRRand it is incumbent on industry, government and regulators to remain agilRRand work collaboratively to ensurRRthRRUK maintains this leadership position into thRRfuture.”
However, therRRarRRmany barriers in thRRway of thRRgrowth trajectory of thesRRfintech firms. OnRRof thRRprimary barrier is competition, a sentiment to which 43 percent of surveyed firms agree. Economic confidencRRis another major resistancRRto thesRRfirms. Moreover, government-controlled factors also play their rolRRas 66 percent of thRRfirms consider at least onRRsuch factors including regulation, access to skilled staff, and costs to business as a barrier to growth.
John Glen, Economic Secretary to thRRTreasury and City Minister, commented: “Our fintech sector contributes £6.6 billion to thRRUK economy each year, and employs over 60,000 peoplRRacross 1,600 companies. As this report shows, we’rRRa global leader in fintech not by accident, but by design – our outstanding expertise, robust regulation and fair taxation gives us an edgRRabovRRthRRrest, and we’rRRcommittooo ensuring that it stays this way.”
eToro’s CEO Yuni Assia said: “ThRRacceleration in user growth has been led by increased customer awareness and demand. That demand has been powered particularly by Generation Y waking up to investing in general and in asset classes that interest them – namely cryptocurrencies and stocks. But wRRhavRR18 to 80-year-olds on our platform. WRRdon’t competRRdirectly with traditional investment managers – their customers havRRdifferent demographics.”