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FinTech start-ups: competitors or business partners?

January 2018

Tony Spillett, BDO Head of Technology and Media

Whether looking at digital challenger banks, lending platforms, payment service providers, digital wallets, cryptocurrency companies or data analytics players, the FinTech sector is flourishing.



Not only are new start-ups offering fresh, digitally enabled and highly efficient services, but established financial services businesses are also increasingly seeing the need to develop their own FinTech offerings, acquire relevant start-ups or partner with third party specialists. McKinsey researchers, for example, identified that an increasing percentage of FinTech start-ups partner with, and provide services to, established banks (47% of FinTechs launched in 2015, up from 34% in 2011).

Developments in data analysis enable banks to target services more effectively, while advances in artificial intelligence mean that robots can now execute trades in investment banking. Blockchain is also having an impact – with $400m expected to be invested in blockchain efforts specific to capital markets alone by 2019.

UK leader

All this activity translates into a substantial economic impact. The UK is a key global FinTech hub, second only to California and ahead of New York and France. HM Treasury estimates that the UK FinTech sector is worth £7bn to the UK economy. London is a particular hive of activity, but Manchester, Leeds and Edinburgh are also emerging as FinTech hubs.

The UK’s strength attracts investors. According to Innovate Finance, in the first half of 2017 alone, UK FinTechs attracted $564m of venture capital (VC) investment (up 37% on the same period in 2016), with 102 deals completed. The UK ranked third behind the US ($3.3bn) and China ($1.0bn). It isn’t only VC funds that see the potential in FinTech. Late-stage FinTech is increasingly being funded by corporates, which participated in nearly half of large FinTech rounds in 2017.

Competitive edge

FinTech businesses are digital to their core. One example is Starling Bank, which launched its “mobile only” current account service in April 2017. Starling is a “full-stack” bank, meaning that it built all its own technology, rather than buying in any readymade banking packages, in order to make the most of truly cutting-edge technology. More technology company than bank, Starling can continue building new technology to support any fresh service ideas in a highly efficient timeframe.

Similarly, Lendable, the UK’s fastest-growing consumer lending platform, developed its own highly automated platform and sees its strength in technology as a key element in its competitive edge. The business is constantly looking for ways to make processes even more efficient and use data even more intelligently. 

Not only do established financial service companies see advantages in partnering with FinTech start-ups, so do the FinTechs themselves. Many new business models depend on partnering with other like-minded businesses that offer a complementary service. Starling Bank, for example, seeks partners that can offer different financial services products to its customers through its own app. Lendable is also forming partnerships with FinTech companies at different stages of regulatory approval. Looking ahead, such partnerships seem likely to become even more widespread in the era of open banking and greater access to customer data, as anticipated with the Second Payment Services Directive (effective January 2018). How big an impact this will have – and the new opportunities it will open up – only time will tell.

Future predictions in a snapshot

We speak to two industry experts on the future of FinTech:

Adrian Watson, CFO of Lendable, the UK’s fastest-growing consumer lending platform

“Longer term I think that FinTech businesses like ours will continue to grow overall market share in the UK and other countries. A lot of lending businesses are building a track record and there’s a lot of institutional money looking to earn the returns that FinTech businesses can provide for them. I think that will be a trend that continues.”


Anne Boden, CEO of Starling Bank

“I think that into 2018/19, many of the FinTechs will seek to have banking licences because that’s a viable way of having a revenue stream. Many incumbent banks will have delivered new technology but are still coping with a cost base that is too large to support new revenue streams. Therefore the pendulum in the big banks will shift away from innovation towards cost control.”

“In the longer term, there’s going to be pressure to change the business models of banks in the light of open APIs, open banking and PSD2. I think you will end up with traditional banks and with people like us, which are different business models where we work with Marketplace partners to offer solutions to customers.”


Further trends


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