A new report by Beauhurst has crowned fintech the UK’s most successful sector. We’ve seen this reflected here at Crowdcube, both in terms of investor appetite and the types of businesses we host on our platform. But what makes fintech such a sought-after sector?
Beauhurst’s report shows a drastic jump in the amount invested in fintech companies in recent years. To put this into perspective, in 2016 £592m was raised; In 2017 this leapt to £1.7b. With £1.85b secured in 2018, fintech is already on track to go even further this year.
Our funded club includes lots of exciting fintech companies, so these figures don’t seem overly surprising. Matt Cooper, our Chief Commercial Officer, reveals more: “Fee-free stock trading platform Freetrade raised £3m, savings app Chip £3.8m, pocket-money card Gohenry £6m, and Monzo, the digital bank, a staggering £20m.” Even as we pen this article, Money Dashboard is live at 170% funded and counting.
Part of this growing popularity can be attributed to the number of young people taking an interest in crowdfunding. The number of 18 to 24-year-olds investing through our platform has nearly quadrupled since 2016. As The Financial Times put it in a recent article, this is “a surge not seen in any other age group”. This age bracket marks a key demographic for the vast majority of fintech companies. With over 40% of our crowd investing in fintech, many of whom are already customers of these companies, the desire to be part of this movement is clear.
The report also makes some interesting points on the industry’s geography. London, described as the fintech capital of Europe, is home to 75% of fintech companies in the UK. This is also something we can attest to, as Matt explains: “On Crowdcube [...] there are now over 67,000 investors who own shares of fintech companies, and almost 20,000 of them are in London and the South East.”
What makes fintech so appealing? Beauhurst states that “Many areas in financial services [...] have remained technologically stagnant, making the sector ripe for disruption.” Founders have watched technology advance in other sectors and are now creating innovative ways to use it to enhance the service they’re offering. A great example of this comes from Chip. The way the brand communicates within the app feels very much like a Whatsapp conversation between friends, complete with memes and well-timed GIFs.
It’s features like these that differentiate these emerging companies from traditional finance titans. They also help to build a community, which is something we’ve seen become extremely important for challenger brands. Matt confirms this, “Across the sector, we are seeing companies choosing to bring their customers right into their business, helping determine new products, and becoming shareholders.”.
Crowdcube Co-founder and CMO Luke Lang attributes the rise of the fintech within crowdfunding to the “profound lack of trust’ created by the chasm in financial markets, caused by the economic crisis of 2008. As Luke puts it “the world’s leading fintechs are using crowdfunding to cement and enhance their relationship with their customers.” An interesting example of this comes from Monzo’s latest raise. Rather than allowing investors to pledge as much as they’d like, they enforced a £1,000 cap. This allowed as many people as possible to join the next leg of their development. Personal touches like special ‘investor’ Monzo bank cards strengthened this relationship and sense of community.
Beauhurst speculates whether the industry giants will seek to collaborate with the newcomers rather than compete with them, as the need to evolve becomes increasingly apparent. It’s a sharp learning curve for the traditional banks, who are adapting their offerings to tailor to a younger, more technologically focussed audience. Matt confirms this, “apps like HSBC’s, for instance, have learned from Monzo, Revolut and Starling and continue to be refined because of those companies.” He goes on to state that “we have only seen the beginning of what UK fintech has to offer, and we are about to witness the come-of-age sector maturing.”