Regional clusters of specialised excellence bolster fintech strength
Devolved nations and English regions are focusing on specific disciplines, but collaboration and cooperation are key to future success
Fintech has one big advantage over many other parts of the economy: it knows no geographic boundaries. The sector is prospering across the UK, with clusters demonstrating growth and excellence in all the nations and regions.
Each cluster area has its own strengths whether in payments, banking, insurance, scale-ups or more specialised disciplines such as regtech and advanced AI.
The Kalifa Review of UK Fintech reported that the existing clusters showed real potential for growth
and developing areas of excellence. Author Ron Kalifa, the former CEO of Worldpay, expanded on this in October when he explained that they were now recognised as powerful economic and social development groups that empowered innovation and demonstrated high levels of resilience.
His review identified 10 clusters that producing high-growth fintech firms, either fully established or well on their way to embedding their own unique areas of excellence.
All four devolved parts of the UK have clusters in the report’s list. In Wales there is a particular strength in financial services. “The hub of our fintech sector is South Wales and it is centred around Cardiff,” says Sarah Williams-Gardener, CEO of FinTech Wales.
She stresses, however, that there is also significant activity across the principality, started by Admiral Insurance 30 years ago. “It has grown from there to provide innovative solutions that the financial services sector has really appreciated.”
The comparison site confused. com spun out of Admiral, she points out, and similar businesses such as Gocompare, Moneysupermarket and Money Saving Expert are all Welsh organisations.
Ms Williams-Gardener says: “In April, we launched an application for our first ever accelerator in Wales and we had 151 strong entries. We took eight businesses through the programme and over 12 weeks they raised a total of more than £9 million between them to build their businesses.”
FinTech Wales is working closely with several businesses, including financial services providers, to achieve global recognition for the region as a hub of excellence. She gives the example of Starling Bank, the award-winning provider, which has recruited 550 people to high-quality jobs in its Cardiff office. It is engaged in fraud detection, underpinned by machine learning.
“For a successful cluster, you need an ecosystem, and you need those skills and talents. You also need an organisation such as FinTech Wales that is not for profit and is about connecting and enabling the businesses in the area.
“I also believe that you have to have the right investment and funding. We work very closely with the Development Bank of Wales and have a very supportive group of business angels, plus high-net-worth investors.”
Other clusters also see talent as a key driver in their areas. SuperTech in the West Midlands is one of the newest organisations driving a regional sector, with a particular strength in its skills base.
This has been evidenced by the recent move of Goldman Sachs’ engineering team to the area. Hilary Smyth-Allen, SuperTech’s Executive Lead, says: “Fintech is flourishing in the region alongside proptech and the related disruptive technology sectors within professional and financial services”.
The west midlands has an economy similar in scale to that of many European countries: its fintech has a strong presence in areas such as payments, banking and lending.
Ms Smyth-Allen believes the Commonwealth Games to be held in Birmingham next year will be another key driver. “It’s a once-in-a-lifetime opportunity for every sector, but one in which fintech and financial and professional services are a high priority.”
She considers, though, that there is not enough entrepreneurial diversity. “The average fintech founder in the West Midlands and nationally is late 40s, white, male and middle class.” She and her colleagues are exploring how to lower the barriers to entry through training and app building.
Further up the M6, the North of England is also seeing substantial activity, with more than 100 start-ups and scale-ups, boosted by planned operations such as Treasury North in Darlington and the new UK Infrastructure Bank in Leeds.
The sector is bolstered by the fact that Manchester is the second largest private equity hub in Europe. “The universities are also increasingly active,” says Joe Roche, Engagement Manager for FinTech North who cites institutions in Liverpool, Manchester, Leeds, Newcastle and Durham as having academic courses, research and business engagement.
“The north has a great reputation as a place of fintech innovation, great culture and a high quality of life,” he adds. “It has a significant cluster of banking and payments-related fintech, with consumer and SME lending featuring strongly as well as areas such as savings, investments and debt management.”
Like organisations elsewhere, Mr Roche says FinTech North sees other UK clusters as partners and friends rather than as competitors. “As the Kalifa Review pointed out, there are some common challenges across all regions and there are complementary strengths.”
England’s south west is “really thriving and has been growing fast over the past few years,” says Stuart Harrison, Director of FinTech West. He points out that research from the strategy consultancy Whitecap shows there is a higher density of fintech start-ups and scale-ups in his area than in any other region outside London.
He adds that it is often said there is a strong sense of social purpose in the tech sector in the region. “I would tend to agree with that, although what really sets us apart is the wide spectrum of interconnected technology skills and solutions allied to fintech.”
These include areas of specialism such as AI and data science, cybersecurity, blockchain and distributed ledger technology (DLT) as well as legaltech. It may come as a surprise to many that Northern Ireland has the highest concentration of fintech employment in the UK: it involves 0.8 per cent of the workforce compared to the national figure of 0.43 per cent. Despite having just 2.8 per cent of the country’s total population, the region generates 3.6 per cent of national gross value added (GVA).
Fintech NI has recently commissioned a three-year strategy report for the sector from Deloitte. This aims to increase the number of companies from 74 to 94 and to bring in up to an additional £25 million in international investment.
Northern Ireland sees opportunities through collaboration on an all-Ireland basis, facilitated in part by a proposed new high-speed train link between Belfast and Dublin opening opportunities in support functions for global technology giants based in the Irish capital, which include Google, Facebook and LinkedIn.
“We have experienced significant growth in fintech with many global investors setting up centres here alongside a thriving start-up and scaleup cluster,” says Karen Bradbury, Sector Lead at Invest Northern Ireland.
“Access to talent and cost effectiveness are important advantages. However, our partnership approach and ability to collaborate are the key differentiators that have driven success in this sector.”
Julian Wells, Director at Whitecap Consulting, based in Leeds, is another UK industry voice who believes that cooperation between clusters, both nationally and internationally, offers the best way forward for enhancing and protecting UK fintech’s position.
“As the different regional networks have continued to grow there has been a growing sense of collaboration. Individual regions will always compete in areas such as inward investment as they strive to create jobs and economic prosperity – but there are also many areas where it makes sense to work together.”