The Fintech Sector and Its Growing Importance in The United Kingdom

Summary

• The Fintech sector in the UK saw massive growth in 2020, as the outbreak of the pandemic and the ensuing lockdown forced people to resort to transacting online to keep themselves provisioned.
• With the pace of growth of online commerce continuing unabated, the prospects of fintech companies is very bright in the UK.
• Investment into the Fintech sector in the UK has seen the highest growth in the UK in 2020 when most other industries saw investments being pulled back or withheld

The rapid transition in the banking and financial services sector in the United Kingdom because of the coronavirus pandemic has increased the importance of the fintech sector manifold. The increased prevalence of online trading, online purchasing, online remittance and several such technology-enabled financial services has increased the demand for fintech and has brought in increased growth prospects for the companies providing these services.

As per the British government’s own estimations, the fintech sector contributes more than £6.6 billion to the economy and employs as many as 76,500 people. Fintech is also important for the nation as it is one of the leading financial destinations in the world. Investment to remain at the forefront of innovation in the industry is required to retain its competitive edge. It is estimated that there are currently more than 1,600 fintech firms in the United Kingdom which is expected to more than double by 2030.

The Importance of Fintech for the United Kingdom

Fintech companies are already providing solutions in a wide array of financial services in the UK. From online payment processing to Online money transfer, to face recognition to personal data protection to online security trading, fintech is making its presence felt everywhere. Each of these segments and several other smaller financial services segments has grown immensely over the past few years, creating more business and employment opportunities in the country.

The fintech sector also has a big role to play in integrating the British economy with the world economy, by providing a secure and faster transaction between businesses in the UK and the rest of the world. Fintech also has a big role to play in bringing about the massive growth in commerce between the UK and its overseas trading partners, as well as facilitating foreign individual and institutional investors to invest in British markets. 

fintech industry gets a thrust from coronavirus pandemic

The outbreak of the coronavirus pandemic gave a massive thrust to the fintech sector not only in the United Kingdom but also in almost all overseas markets. The prevalence of online purchasing and online transactions which was growing as relatively slower pace before the outbreak suddenly saw a sharp increase in the business activity levels. Fintech companies started to make massive capital investments and businesses which were small started gaining traction like never before.

While some industries have lost market because of the massive growth that has been witnessed by the prevalence of online commerce, the fintech industry has been one of the biggest beneficiaries of this transition.

Let us have a lens on three fintech sector companies listed on the LSE

Augmentum Fintech Plc

Augmentum Fintech plc (LON:AUGM) is a London based company that invests in late-stage Fintech businesses in the UK as well as other European Countries. The company particularly focuses on businesses that are working on disruptive technologies in the banking sector, the insurance sector, as well as the asset management sector. Other than the above, the company also has an interest in cross-industry propositions.

(Source- Thomson Reuters)

The shares of the company have been performing well on the London Stock Exchange since the beginning of the year. Except for a sharp dip during the Month of March and April the stocks have been climbing steadily and strongly. As on 9 October 2020 (10.17 AM GMT+1) the shares of the company have been trading at GBX 125.00 per share losing 0.40 per cent over the previous day's close.

International Personal Finance Plc

International Personal Finance Plc (LON:IPF) is a Leeds West Yorkshire based digital business providing home credit. Other than the United Kingdom, the company has digital business spread over 11 countries in Australia, South America, and Europe.

(Source- Thomson Reuters)

The shares of International Personal Finance Plc have not been performing well on the London Stock Exchange over the past 5-6 months. It started the year strongly, but as soon as the pandemic broke in the UK and other parts of Europe, the shares fell and have been on a sidewards movement since. Though the company is a fintech business, people avoiding availing credit due to the troubled market conditions can be called the reason for its poor performance. As on 9 October 2020 (10.18 AM GMT+1) the shares of the company have been trading at GBX 52.5 per share gaining 1.71 per cent over the previous day's close.

Boku Inc

Boku Inc (LON:BOKU) is a San Francisco based mobile payments platform providing company. Their technology, known as carrier billing allows customers to pay bills and make online purchasing through their mobile phones even when they do not have access to credit cards or traditional bank accounts. The company has its operations worldwide.      

(Source- Thomson Reuters)

The share price movement of Boku Inc has been volatile on the London Stock Exchange since the beginning of the year. As on 9 October 2020 (10.18 AM GMT+1) the shares of the company have been trading at GBX 100.00, slightly higher over the previous day's close.

The wider gain to the British economy from the fintech sector growth

The fintech sector helps a country to be more technology-enabled. This, in turn, not only helps it to achieve a higher growth trajectory but also opens opportunities for highly skilled manpower, which intern would make the country more competitive.