The traditional banking landscape has been dominated by the same banks for a considerable amount of time. The “Big Four”, combined with a few others, have created an oligopoly that remained unchallenged for years. The emergence of fintech and fintech companies represents a new threat to traditional banking and an increase in consumer choice. In fact 2017 saw more money invested in the UK fintech market than anywhere else in Europe, despite the concerns over Brexit.
Over the next few years the use of Fintech will almost certainly grow in the UK and Europe. 2017 saw around £1.3 billion invested within the UK Fintech industry and it’s plausible that 2018 will exceed this figure. There are challenges and an air of uncertainty ahead for the UK fintech market. There are still numerous issues around Brexit that could affect future investment. A big factor that could delay investment, is whether the E.U. and the UK can agreed upon the free movement of people. If the talent pool within the UK is drastically reduced, many companies and investors may relocate their operations. The other problematic area will be whether the ease at which the UK has access to the European market. Access could become expensive if authorisation is required from each target EU member state.
Despite this, fintech and fintech banking represents a real competition to the high street banks. In order to counteract the threat and risks presented by fintech and the Revised Payment Service Directive (PSD2), we could see an increase in the major bank’s marketing spend and cyber protection. According to the Bank of England’s (BoE) 2017 stress test this could effectively reduce profits by £1.7 billion. These same banks are also looking to embrace fintech. By using technology to replace staff banks are predicting that expenditure will drop from £72 billion to £60 billion between 2016 and 2023.
Fintech definitely presents new challenges to traditional banks but it’s worth remembering that it will face challenges of it’s own. So who are the fintech companies that are driving a fundamental change in the way people manage their finances and what makes them unique? Choice Business Loans took a look at the companies that are at the forefront of revolutionising the industry.