Ep. 228. 11FS Presents One Fintech Nation - The UK as a Fintech Hotspot

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ST:  Hello, and welcome to One Tech Nation, in partnership with Tech Nation. I'm Simon Taylor, and today, we're bringing you the second in our four-part series, showcasing the UK fintech scene. If you missed the first part, be sure and go to listen to Episode 226, to get up to date. We are bursting the London fintech bubble, and talking about UK fintech successes across the whole country. We're putting this show together in partnership with Tech Nation, who just launched their rebrand last week, formerly they were Tech City UK and Tech North, to reinforce their own goals in bringing UK fintech together. 

To start with, we wanted to take a look at what it is about UK fintech that's so attractive. How did we get to the position we're in, as arguably Europe's fintech capital, and certainly a global fintech hub? We got several different perspectives on this, from both within the UK and outside. Kicking off with Rajesh Agrawal, who, as Deputy Mayor of London, obviously has a biased London-centric point of view on this, but even with that in mind, he was hugely positive that the UK would remain the fintech capital of Europe.

RA:  London is a global city, and we are the fintech capital of the world. Our tech industry is very growing, we are the largest tech ecosystem in Europe, as well. So, it's only right that we actually work with other cities around the world, and build bridges, and making sure we make it easier for entrepreneurs from here to work with other countries, but equally, entrepreneurs in other countries, if they want to come and expand in London, and in the UK, they are able to do that. 

Fintech, if-, if you like, is the crown jewel of London's tech industry. It's very successful, and it's built on the natural strength of London, which is finance. London is a-, is the finance capital of the world, is the banking capital of the world. We've got more American banks in London than there are in New York. We've got more banks than any other city in the world, we've got more insurance companies than any other city in the world. 

I mean, I come from a foreign exchange background, and in foreign exchange, about $3 trillion are traded every day worldwide, half of which are from-, traded in London alone, every day, $1.5 trillion are traded in the city of London. So, fintech, essentially, is building on those core strengths, uh, and it's really the crown jewel of London's tech industry, and it's-, it's got the potential to grow so much. I mean, fintech is so much talked about already, but I believe that we are only scratching the surface. There's so much more to be achieved.

ST:  Eileen Burbidge, who's Tech Nation Chair and Partner at Passion Capital, and a Fintech Envoy to the Treasury, agrees.

EB:  No, so I think, first of all, with respect to the, sort of, sector, fintech itself, I think we're really still in early days, so that's part of why it's so exciting, because, as much energy as there is now, and as much support as there is, from all across the-, the industry, whether it's existing financial services institutions, or government ministers, or policymakers, or regulators, we're really just at the beginning, so that just means there's much more to come. Having said that, with the UK position, we're clearly leading from the front right now, we are the world's leading fintech hub, and I think there had been questions, or doubts, over the last year, if we were going to be able to maintain that, and what this conference, and a lot of the conversations, already, have shown, is we have definitely maintained that leadership position, and we're probably reinforcing it for years to come. We're going to see the next wave, and it's just-, it's not even been a wave, we've just had this constant volume, which I think is fantastic.

ST:  The idea that we're only just scratching the surface seems to be key here. The UK has achieved so much already, but the general feeling is that the best is yet to come, which is exciting. There are a lot of international players in the UK fintech scene, not to mention a lot of VC investment. Last year, over $3.4 billion was invested in to UK fintech, more than double that of the year before. This is even more of a shot in the arm for UK fintech, as on the flipside, last year, global investment in fintech decreased by 18%. These VC investments put the UK second only to the US, in terms of global investment in to financial services in 2017, and it allowed it to leapfrog China for the first time, putting the Chinese in third place.
However, VC investment alone is not all it takes. Talent and entrepreneurial spirit have been key to the UK's success so far.

RA:  Well, I'm very clear that London is a successful city partly because it's got amazing talent. I mean, that's the number one reason. And I speak to investors from around the world, they come to London because they will be able to find talent in London, regardless of the industry that they are in. So, it's very important for London to remain open, and that's why we launched the campaign London Is Open, straight after the referendum, because I think that message is very important to the world. And the Mayor has also published a white paper on immigration, making it very clear that London has benefited significantly from talent from all around the world. In the tech industry, particularly; almost 55% of London's workforce in the tech industry are overseas born.

But, apart from that, there's the entrepreneurial culture, which is very important, and London is a very entrepreneurial city. And, with regards to entrepreneurship, I'm often asked, "Do you think entrepreneurship can be taught, or not?" and I say, "I don't know if it can be taught or not, but it can be caught, like an infection." So, if you create an environment which is entrepreneurial, you know, there are people who want to go on that journey, but if they come across more entrepreneurs, if there are role models, then certainly that helps the entire ecosystem. 

And-, and that's why we need to-, we need to create that. So, when the, sort of, Old Street, and the Shoreditch, uh, area started developing, I remember one of the very popular things was, at the Old Street Roundabout, was the Old Street, sort of, "drinkabout", the Silicon Drinkabout. Uh. It's about creating that environment, but also providing support to-, to startups, by the way of funding, by the way of opportunities to network, by the way of providing them mentoring, and all those sort of things, and those are some of the initiatives that we are doing, from the Mayor's Office, to-, to-, to provide to young people, and to young entrepreneurs.

ST:  How do we maintain this talent, and why is the UK so attractive to companies outside of the UK? More and more, we're seeing that European companies move to the UK to open new offices over here. What is it they're looking for when they decide to expand? We spoke to Anthony Lesoismier and Vincent Howard from SwissBorg, a blockchain-based wealth management ecosystem, that started out, unsurprisingly, as their name suggests, from Switzerland, but have recently opened an office in the UK.

AL:  So, I'm Anthony Lesoismier, I'm a Co-Founder and CSO, uh, at SwissBorg.

VH:  So I'm Vince Howard, uh, I've just joined SwissBorg, as Head of Marketing.

AL:  So, we are an on-chain wealth management ecosystem that is powered by community, and that's very, very important, powered not only by community, but by swarm intelligence. So, we have a community, uh, of over 25,000 people, across 140 countries in the world, so that's really huge, and we are leveraging their intelligence at different levels, so it could be the decision making within the ecosystem, uh, concerning technical evolution for the platform, but, as well, on the support side, as well, that the community could get updated, uh, and-, and stay in-, in touch with the latest development within the ecosystem. So, that-, that's really how we are different. What we try to achieve, with SwissBorg, is to build this new wave of a wealth management system, where, uh, the community, which is the greatest asset that you can have with any company, is really integrated, uh, within the ecosystem.

So, just to-, to be very, uh, I would say, accurate, uh, it's not like we are moving from Switzerland to the UK, but we are expanding our team here. So, the headquarters is based in Switzerland, but we have teams in Japan, in Canada, now, uh, we have, with Vince, and the team in the UK, we are most probably going to expand to other cities, as well. There is so much value that you can take from being in different places in the world. Of course, that came with, uh, a lot of challenge, because being a decentralised team, you need to work and collaborate together, but at the same time, it's-, it's really something that gives a lot of value to-, to the work that we do.

VH:  When we had our ICO, quite a significant amount of our community, um, is also in the UK, so I think, again, it's important to have a presence here, and to be able to reach out to the people who are supporting us, and help to build a community here in London, and also across the whole of the UK.

I think the UK market is quite mature, when it comes to investment, and-, and money management, um, I think quite a lot of people are used to traditional funds, and fund management, hedge funds, and that system-, ecosystem, in itself, but at the same time, I think the British public have also been at the blunt end of some of the mismanagement that comes from some of the larger companies, uh, maybe not feeling appreciated by big banks, uh, and big asset managers, so to speak. So, I think there is an opportunity, especially with blockchain, and decentralised organisations, and I think there are people in the early stages, or early adopters, at least, who find the prospect of being more in control, and being a-, a-, an early partaker, an early participant in a new system that helps to, or-, or may potentially disrupt financial management, in the way-, in the way that we know it, in traditional models. I think that's quite attractive to people here, um, hence why I think the UK is-, is quite ahead of the curve, uh, compared to some other countries.

Regulation can also help there, and, you know, people like the Bank of England, Governor, Mark Carney, speaking quite frequently about cryptocurrencies, and the Bank of England potentially adopting their own model, uh, I think it helps to legitimise the practice. You know, we're not quite there, uh, and regulation can change things, uh, but again, I think the government here, and I think a lot of businesses, are realising that blockchain and decentralised organisations are the way to go, and there's a future in that technology.

AL:  I would say, for blockchain, it's still at a very, very early stage. Switzerland is quite advanced, and when-, when we look across Europe, it has been the hub for blockchain startups and DAOs, but I think the UK, from what I can see over there, Germany, as well, they are two very serious contenders, I would say, for-, for Switzerland, and, um, this is part of our mission, as well, beyond SwissBorg, is to educate people with blockchain, give the benefits of using this newer technology, not only, I would say, for investors, but as well for institutional players, that they could better understand what blockchain is, and how they could beneficiate from blockchain, and for sure, uh, London is-, is a good-, is a good place to be, when we talk about finance and institutional players.

ST:  The team at SwissBorg appreciated the forward-thinking nature of the UK, with a special acceptance of blockchain and cryptocurrency by both customers and financial services institutions, particularly with regard to regulation, which is why they chose the UK as the next place to open an office, after their success in Europe. Even more unusual than this are those companies who are not based in the UK, who decided to launch their products or companies here first, rather than their home market. We spoke to Frank Jan Risseeuw, CEO of Yolt, an app-based PFM, or smart money tool, based out of the Netherlands, as a subsidiary of Bank ING, but who chose to launch in the UK. We spoke to him to find out why.

FJR:  Yeah, my name is Frank Jan Risseeuw, I'm CEO of Yolt. Yolt is a smart money platform, built on the promise of Open Banking. We started about a year ago, in UK, uh, launching, and since then, we have almost 300,000 registered users. And what Yolt does is that you can connect to more than 35 banks in the UK, to see all your money in one place, enriched with smart insights, categorisation of merchants, and we've got a marketplace with exciting partners, to see how we can help you manage your money in-, in a smart way.

2.5 years ago, we decided, uh, which market to go first in, and, at that stage, PSD2, which is the law, European law, who enables companies like Yolt to have access to banks, was designed, and we saw an opportunity in the-, especially in the UK, where the Open Banking team took on the PSD2 legislation, and translated it in to a local policy, on how banks would share the data. So, we saw a very proactive group of people to-, to implement Open Banking, so that was a key reason. 

And secondly, yeah, you also saw that in the UK, there are a lot of new, exciting companies, a lot of innovation in the banking space, and we said, "Okay, if we really would like to develop something new, then let's go to a place where it's a challenging landscape, and we see a lot of companies who we potentially could work with, but also being challenged by, to create a-, a new proposition." And thirdly, I would say, when you develop something new, it's important to design it together with, uh, people, and in London, you see a large group of people, and for us, especially the Millennials, who are open to test alpha versions of apps, or to join cocreation sessions, and, yeah, that's really the-, the-, the starting point of building something new and exciting.

So, in the Netherlands, PSD2, at that stage, uh, was not very-, there was not a lot about. It was an idea, and there was totally not such a controlled way of implementing, like in the UK, um, so that's more looking to the market. Secondly, from an ING perspective, which is the investor in Yolt, ING, is a big bank here in the UK, and, uh, such a new money platform, as we call it, uh, and a bank without a balance sheet, they said, "Okay, if we really would like to test how such an independent company proposition would work, we should go to a market where we don't have ING presence, and to see if we can develop this from scratch." So, ING is quite widespread in Europe, in 11 countries, um, uh, and the Netherlands-, they have a very big footprint in the Netherlands. They said, "Okay, let's go to a market where we are not present," and that's, uh-, that was the UK.

Yeah, it was a very exciting step, to go to the UK, uh, I still remember, two years ago, when we were designing the product, we had our first hypothesis, and our first RDs, uh, at that stage, and it was, um-, most of us were Dutch, and-, or some people-, non-UK people. So, at the stage when we crossed the North Sea, in to London, we saw that we had some hypotheses which were too Dutch, and we-, we-, here in the Netherlands, we really like to save, uh, a lot of money, um, so it was very important to-, to make it fit with the-, you know, the mindset, and how people manage their money. So that was, kind of, a first step.

Yeah, so the UK was really our first market, to-, to test and validate a lot of assumptions, and we announced to go to Italy and France, and we did also quite a lot of research in these countries, but also in some other European markets, mainly to understand if there are key differences in Millennials, on how they manage their money. And what you see is that it's not a lot, so what we are doing, currently, in the UK, I am confident that we can ship the product, and also a large part of our marketing strategy, to other countries. Of course, we-, we will fit it around some local preferences, and we will translate everything in the local language, but I think the product is-, is for 90, maybe even more, percent, also fitted for, uh-, for other markets, to be, uh-, to be exported.

ST:  So, Yolt's story is slightly niche, as they needed a market where ING wasn't prevalent, in to which they could launch. However, the predominant themes of the progressive and openminded nature of the UK market, to test and use new products, are still key here, as is our willingness to adapt new fintech solutions and regulations such as PSD2 and Open Banking. Additionally, the UK market is diverse and competitive, allowing products to be thoroughly tested, to test marketing strategies, and to realign hypotheses, and ultimately use the UK as a stepping stone to venture out in to the rest of Europe, as Yolt are currently doing.

But how do we better foster this innovation, and keep the new flow of talent in to the UK, whilst also allowing UK companies to grow and branch out beyond the UK? The UK Treasury and their Fintech Envoys have a plan. It's called Fintech Bridges, which will help these companies, both inside and outside of the UK, scale up and increase the ease with which they can make international partnerships and expansion plans.

EB:  I think that we've got enough of the elements here in the UK to foster the right kind of environment for one to start and grow a fintech business, right here in the UK, and scale, to the extent of an OakNorth or a Monzo. What the Fintech Bridges enable, and I don't think they're necessarily-, I'm going to double-use that word, a necessity, uh, for a fintech to be able to grow and scale, but it certainly helps, and it reduces friction. Once a fintech that's based in the UK, or started in the UK, starts to internationalise, and wants to expand, and go in to another market, it's really going to reduce the friction, and just help them land in a new market, without having to start from scratch, from a regulatory point of view.

ST:  Yeah.

EB:  We're inviting other innovators to come in, and to service the UK market.

ST:  However, with all this talk of attracting international talent, and expanding UK companies out in to Europe and beyond, there remains a big question hanging over the UK's future, in fintech and in general. It's the B word. We mean, of course, Brexit. At this point in time, Brexit is still being hashed out between the UK government and EU officials, and no one yet knows how it's going to play out. With all this uncertainty, how much will it affect UK fintech going forward? Will the UK remain the jewel in the European fintech crown? Or will we lose our position?

JG:  You know, we're obviously going through a process, at the moment, as we exit the, uh, EU, um, we will have new arrangements in place, and I think all of these sort of matters are for discussion, and obviously liaison with my colleagues in the Home Office, but I'm not hearing, today, a, you know, big problem, in terms of an access to the right talent. Um. You know, we've got a lot of homegrown talent, and we've also got, you know, global investors coming here to-, to-, to seek to develop businesses in London.

ST:  This is Economic Secretary to the Treasury, John Glen MP.

JG:  Well, I think we see a range of options, and, you know, I think at the very early stages, you see networks, and there are strong networks in London-,

ST:  Mm.

JG:  Of-, of, you know, high net worth people, um, you know, private offices, and then you go to VCs, you go to-, move up the scale. And I think, at the moment, we've got an interesting ecosystem of options, I think that there are no systemic gaps that-, that are causing difficulties. I think, as we sit in London, where we've got such a developed capital market, we've got great pools of capital, and we've got a great appetite to invest in a range of-, of risk profiles. You know, this is something that the government is always looking at, and I was with the Chancellor, we were talking to some investors, uh, just earlier, in-, in a workshop, and, you know, there are some ideas about how we can develop that, and make London more attractive, 

But I don't foresee difficulties, because, at the core of this is an industry that has a level of maturity, a coming together of the English language, the-, the legal, sort of, framework-,

ST:  Mm-hm.

JG:  And the technical skills, as well as the financial wherewithal, through the City. So, that is difficult to replicate. 

ST:  This is Rajesh Agrawal, the Deputy Mayor of London.

RA:  So, whilst Brexit poses its own challenges, I've got no doubt in my head that London will continue to be the fintech capital of the world. One is the skills, the, sort of, technical skills, where-, you know, the digital talent, as it were. And we are doing a lot, we are investing significantly, to make sure that the young people have got talent, the right kind of skills, not just for the jobs of today, but for the jobs of tomorrow.

ST:  They are both optimistic that Brexit will not have a big impact. We will continue to attract the right talent, the right investors, thanks to the maturity of our fintech scene. It's reassuring if our own politicians believe that fintech will continue to thrive, but what about those on the front line, the companies themselves who will be directly affected after Brexit?

GM:  I think, despite Brexit, there are a bunch of factors that contribute to London still being a hub in Europe. The first one is the availability of capital.

ST:  This is Greg Michel, Fintech Lead at Tech Nation.

GM:  If you look at funding numbers, and the amount of funding that is invested by UK-based VCs in companies, not only in the UK, but everywhere else in Europe, it really dwarfs the rest of, uh, Europe. So, that availability of capital is a very strong pull, and, as we know, for an entrepreneur, capital is oxygen, so this is a place where there is plenty of that. The availability of talent is still very much there. If you look at the maturity of the ecosystem now in, uh, London, we have a lot of companies that are starting to IPO, to exit, we've got Funding Circle coming online very soon. So this means that the cycle of entrepreneurship is starting to happen, that you're going to have what you have in Silicon Valley, families of entrepreneurs, if you want, that have come from one company, in to the next, etc. So, the availability of talent, I think, is still very much there. 

And then you have an element of diversity. I think London is remarkably diverse. You have a diversity of, uh, ethnicity, but also of perspective, a diversity of business models. I think this is something that is really quite particular to London. And then, last but not least, it's also, you know, a fun city to move to. It's something that, maybe it's a bit overlooked, and it's a bit of a soft pull, but still, you know, if you choose between London and other capitals in-, in Europe, you know, London definitely has a pull for young people. And then, of course, if we're talking about fintech, this is still one of the, if not THE, uh, financial centre of the world, for financial services, which means that you have access to a lot of talent and expertise here, which can help you build your company.

ST:  And this is Frank Jan, from Yolt, who is equally not worried by Brexit.

FJR:  Yeah, so when we chose the UK, we were, of course, not [laughter] um, aware, and-, and counting on this scenario about Brexit, so it came as a surprise, uh, but, um, yeah, it didn't change our strategy or our focus, or our commitment to make UK a success, and grow faster in this market. And I think, also, talking with more companies, um, local companies, but also foreign companies, who operate in the UK, like Yolt, I think we will see that this will not go away fast. Although Brexit comes with a lot of uncertainty, um, I think there's a lot of smart people, uh, a lot of ideas, a lot of capital, as well, to invest, um, and scale the ideas, or even, um, find new, or start new companies.

So, I'm not scared about that, I think it-, it-, it comes, still, with some uncertainties, around banking licences, around, uh, legal structures, and yeah, that's something to keep an eye on. Uncertainty is something we have to deal with, but I see still a bright future for, uh, for London. 

ST:  So, if the threat of Brexit is not that much of a threat at all, according to those concerned, and, despite the uncertainty, UK fintech has continued, and will continue to thrive, clearly the future is looking bright.

In this series, we're looking to showcase UK fintech as one entity, and bring the whole nation together under one fintech umbrella. With this in mind, what are our core fintech strengths, and where can we excel as a whole nation? We got some thoughts on this from our interviewees. From the SwissBorg team, collaboration is key between banks and fintechs, internally and internationally.

AL:  I would say, because the fintech culture here, I would say it's more natural for banks to collaborate when-, when we talk about blockchain, and all this technology, because they are not very familiar with what is happening beyond their own scope, and the-, and with the-, all the regulations that they need to comply with, the compliance department of every bank has just doubled size since the-, the last crisis. They are very reluctant to onboard new businesses. 

But they are very openminded, I would say, in the UK, because this is in the culture, that-, the same in Germany, because both of these countries are-, is, uh, an important hub for fintech. So, definitely, that's-, compared to everywhere else in Europe, that's very different from the relation you can have with banks. For example, in France, or in-, in Spain, Italy, it's much more complicated, to do business, when you are a young company. But here in the UK, definitely, banks are willing to cooperate with-, with fintech, and to build together, um, applications. 

ST:  This is an opinion shared by John Glen.

JG:  Well, it will be to look at where there are opportunities to grow fintech, outside of London, which is obviously, because of the proximity to the financial markets, and regulator, and so on, you know, it has always been this-, the, sort of, centre. And, um, you know, you're right, we're going to have a-, an envoy in Wales, Northern Ireland, one for the-, for the rest of England, England regions, and Scotland, of course, um, that we recognise where there are the right sort of synergies between universities-,

ST:  Mm-hm.

JG:  And skills, and financial institutions, and we should, you know, get on and try and make it grow there, as well. I think that banks, and big institutions, are changing, in terms of their attitude, because they can see fintech companies, challenger banks, and-, and fintechs coming in, and-, and offering, you know-, you know, access to-, uh, or, you know, setting up markets and-, that will threaten them.

ST:  Yes.

JG:  So they-, they have got to respond. So, I think some of the-, you know, this is about disruptive technology, which is an opportunity for everyone. It's an opportunity for the consumer to get access to new services, uh, in a more accessible form, and it's an opportunity for banks, too, to develop their client relationships with new products. So, I think I welcome this disruption, it's positive for the consumer, and, you know, I think watch this space, really.

ST:  We're excited to see what happens next for UK fintech as we move forward. What new companies will emerge? Who will move in to the UK? And ultimately, what are the benefits for the customer, as a result of all of this innovation? As John Glen says, watch this space.

Next episode, we dive in to whether fintech communities are actually solving problems for customers. Everyone loves to say they're changing the world, how can fintech really make a difference for customers across the UK? What about the unserved sectors of society, who find money management hard, and sit outside of the fintech bubble? Has fintech missed a step?

This episode was hosted by me, Simon Taylor, written by Laura Watkins, produced by Ollie Judge and Petrit Berisha, and edited by Michael Bailey. Thanks to Greg Michel at Tech Nation, and all of the Tech Nation team, John Glen MP, Rajesh Agrawal, Deputy Mayor of London, Eileen Burbidge, Chair at Tech Nation, Partner at Passion Capital, Anthony Lesoismier and Vince Howard from SwissBorg, and Frank Jan Risseeuw from Yolt. 11FS, the people who brought you this podcast, transform businesses, and, frankly, get shit done. To find out what we can do for you, visit 11FS.com, or email hello@11FS.com. If we hooked you with this episode, be sure to subscribe on Apple Podcasts, or your favourite podcast client, and follow us on Twitter, Facebook, YouTube, for more exclusive content. Thanks for listening, and goodbye.


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