Fifteen years ago no one would believe you that travel agents would be all but obsolete on the high street by 2015. Thomas Cook was the leading name in UK travel when Queen Victoria was on the throne – a 120-year market leader. Displaced.
Go back just three years and you wouldn’t find many predicting the black cab’s decline to an app upstart.
Sometimes the present can feel permanent. But this is an illusion; change is the only constant. Dominant market leaders are often more vulnerable than anybody realises and the principal point of vulnerability is technological advancement.
I believe that financial services is the next major industry that will be completely transformed by the application of new technologies.
MarketInvoice is part of this change. Our peer-to-peer platform has enabled businesses to access £320m of working capital and we’ve scaled ever growing our Holborn-based team to nearly 50. We know this is just the beginning.
London right now lies at the heart of the transformation in financial services, housing many of the old leaders and many of the new upstarts. But why is London proving so popular for fintech start-ups?
Firstly: talent. London has a huge pool of highly skilled finance workers and they’re ready for something different.
Back in 2006 – pre financial crisis – nearly all my cohort graduating from Cambridge were looking solely at finance careers at large investment banks in London. Post-crisis the attitude towards a career in big banks is no longer so positive – both amongst new graduates and my own 2006 group.
It is increasingly possible to attract top-class talent away from the banks. Even some of my old peers who thought I was crazy to quit the city to start a company are now emailing me to ask about fintech and what roles they should be applying for.
On top of that London attracts global talent. We’ve recruited great people from all over the world including Europe, the Far East, Israel, the USA, and China.
A second reason why we located in London is that successive governments in the UK have recognised the value of entrepreneurship and established a regulatory framework that helps fintech entrepreneurs get off the ground.
In August 2012 the British Business Bank started investing directly in small business through our platform, they have now provided nearly £40m of finance through MarketInvoice.
It’s the kind of boost you wouldn’t get elsewhere.
Thirdly, the UK has a relatively advanced technology and data infrastructure, and – importantly – an open mind to new technology.
Data availability (through for example Companies House) in the UK is good and getting better. Fintech companies like DueDil are helping push the boundaries of open data.
The payments infrastructure in the UK is also strong relative to international competition. Even the fact that the vast proportion of business-to-business payments from large corporates is completed by BACS rather than, for example, cheque sets the UK apart from many other countries, including the US.
In the UK we’re reaching a point of ‘digital by default’, where people expect technology to change things, and welcome the improved efficiencies technology can offer.
Again, this is something that is too often taken for granted, but as a fintech entrepreneur is a key benefit of operating out of London.
A fourth reason for fintechs locating in London is the concentration of the banking sector. UK financial services customers are eager for more options, fairer deals and better service.
On too many fronts UK financial services markets had become oligopolies. Fintech is changing that.
The final reason for locating in London is MarketInvoice-specific. We allow businesses to sell their outstanding invoices direct to investors to release working capital.
In some ways it’s a new take on the very old world of invoice factoring, and the UK has the largest factoring market in the world, with monthly volumes of £21bn in lending.
Whilst we’re growing and disrupting that market, its existence on such a scale is a big advantage.
We’re at the beginning of an important journey. What has been achieved already by London-based fintech companies is amazing. We’re giving people a better deal on loans, investments, payments, and so much more.
This benefits everyone. In a time when more traditional financial services find their reputations in tatters, fintech offers a better future.
(I wrote this piece for Tech City Insider: http://www.techcityinsider.net/five-reasons-for-londons-fintech-boom/)