Written by Adam Hartley, Head of Content at Spreckley.
Despite a slight (and understandable) dip in the levels of investment throughout the COVID-19 lockdown period, the UK’s fintech sector is still booming. Innovate Finance data showed that UK fintechs attracted a record $4.9 billion investment in 2019, a leap from the $3.6 billion invested in the sector in 2018.
The UK fintech market data also confirms that venture capital investment in UK fintech dropped by 39% in the first half of 2020 ($1.8 billion invested in 167 startups), compared to the first half of 2019 ($3 billion invested in 263 startups).
Despite this, Innovate Finance still reports that, “the investors and fintechs we spoke to were upbeat despite the challenging business environment, highlighting the opportunities for investors and the avenues for growth for many FinTech companies.” Adding that, “moreover, investment in H1 2020 was actually up on the previous six months.”
Conservative VC investors ‘cautiously optimistic’
Perhaps the most obvious response to the COVID crisis amongst UK fintech investors has been to adopt a slightly more conservative approach, favouring mature, later-stage businesses in the sector, over higher-risk early-stage startups.
Over half of that $1.8 billion invested in UK fintechs in the first half of this year, for example, went to five of the UK’s larger fintech brands: Revolut, Checkout.com, Starling Bank, Onfido and Thought Machine. While early-stage startups in the sector raised only 8% of that total.
Still, despite early stage UK fintech startups having been hit the hardest by the pandemic, investors are still reportedly ‘cautiously optimistic’, in many cases because digital fintechs were swift to adopt to the “new normal” conditions, with the vast majority of staff already used to working flexibly in an agile fashion from home.
“Global interest in FinTech remains high according to Kevin Chong from Outward VC,” reports Innovate Finance. “His discussions with big-ticket investors showed that “appetite and investment capacity for fintech has not been diminished by COVID-19.”
Chong added that: “In this part of the cycle, London remains the world’s pre-eminent fintech hub because of the quality of its fintech founders, a proven track record in building global fintechs and its deep pool of fintech investors.”
Brits moving to digital and mobile-first options
Perhaps the biggest opportunity for any UK fintech startup or scale-up that has emerged over the lockdown period is the fact that millions more British consumers are switching from traditional high street banks and starting to consider the wide array of digital and mobile-first options that are available to them.
Global fintech app usage, for example, grew significantly in the first half of 2020, accelerated considerably by COVID-19, backed up by the data recently made public in the latest Adjust “Mobile Finance Report 2020”. That report shows how average sessions in investment apps were up 88%, payment app sessions were up 49% and banking app sessions increased by 26%.
"The impact the pandemic has had on banking and the acceleration in mobile digital services should not be underestimated," according to Paul H. Müller, co-founder and CTO of Adjust. "While the banking sector has been adapting to digital disruption for several years, COVID-19 is accelerating the transformation, opening up access and opportunity to millions of un- and under-banked consumers around the world."
Open banking and the challenges for fintech PR
Coronavirus and the widespread lockdowns across the world has clearly fast-tracked the growth of digital and mobile-first financial services, encouraging millions of new consumers to engage with fintech startups and scale-ups.
At the same time, in an increasingly crowded market, both investors and consumers alike are looking for similar things from new and growing fintechs, before they are willing to bet their hard-earned cash on them.
This increases the challenge for fintech PR in 2020. So, for example, it is no longer feasible to use woolly buzzwords (“digital distruptor”) or claim that Fintech X is challenging the “traditional incumbents” in banking, in insurance or in other financial services sectors.
That’s because Fintech X is highly likely to be competing with dozens (or hundreds) of other similar fintech businesses in its sector. The UK fintech market is crowded and it’s only going to become more so in the coming years.
To really succeed in such a busy sector, PRs need to clearly articulate how Fintech X is solving a particular problem better than anybody else. And they need to do this in plain, jargon-free English, backing up their assertions with clear market research, data and evidence wherever possible.
Sustainability of any new fintech offering is also key, which means fintech PRs must work harder on building truly great “cut-through” thought leadership content to present the strongest, most credible and capable fintech leadership teams to media, to investors and – ultimately – to the consumer.
One thing is for sure. The 2020s will no doubt be a fascinating, fast-growth decade for the right fintech businesses, as we move into a new era of open banking, encouraging far greater customer transparency and far more demanding customers! Let’s hope that fintech PRs can start to find new and better ways to tell their client’s stories in order to give the investor or the customer the information they need quickly, succinctly and clearly.