The UK Technology

Market

Fintech and Brexit Summer 2016

Table of Contents An overview of Fintech

The Rise of Full Stack in Fintech

Hotspots by Role – (volumes & salaries)

What Next?

An Overview of Fintech

An overview of vacancies in the Financial Technology sector in 2016

"Five years ago, we chose to base TransferWise here in the UK  — and we’ll

continue that plan. I don’t know if it’s going to be possible long-term. No-one

knows what comes next. But if we can, we’ll make it happen.”

Taavet Hinrikus, CEO of Transferwise

Up until the British referendum result, London was the

undisputed darling of the VC community in Europe,

accounting for 36% of all funding into the EU in Q1 of

2016, with FinTech being the main beneficiary.

Of the top 25 Fintech Unicorns worldwide, four are

HQ’d in London, making it the second placed city

behind only San Francisco. The combination of

access to capital and human talent, along with the

business ecosystem, has resulted in London being a

center of innovation, with over 600 startups being

launched every day in the first half of 2016.

This has meant that the Fintech sector has been the

fastest growing for jobs out of any in London over the

past 18 months, with a 75% increase in volumes year

on year, putting the UK banking sector under

increasing pressure in a myriad of ways.

Brexit though has given many Entrepreneurs room for

pause. This manifested at London Fintech week

2016, whereby the Berlin Senator for Economics and

Technology Cornelia Yzer, announced that since the

referendum, hundreds of UK based start-ups have

enquired about relocation. With businesses

operating in a holding pattern pending further

discussions between the UK and EU, the key decision

is ‘invest further in the UK or go elsewhere’.

Whilst Brexit will cause short term disruption, longer

term, the situation is much harder to forecast. For the

London economy, maintaining access to the EU

single market is imperative to keeping its FinTech

crown. If as a result of Brexit it can then combine that

access with free trade agreements with other G20

countries, London could leapfrog San Francisco to

become the Global FinTech capital.

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Fig.1 Venture Funding by Quarter Fig.2 IT Vacancies vs Fintech Vacancies

Deal Vol Deal Val Total IT Vacancies

Software IT Vacancies Fintech

Source: Venture Pulse, Global Analysis of Venture Funding,

KPMG and CB Insights (data provided by CB Insights)

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Given Brexit is going to take nearly 3 years from today and probably much longer by latest

estimates, this is way beyond the business plans of many companies, including the fast moving

FinTech services, whilst politicians agree how to Brexit over the many years to come.

Wheras many of the first generation of fintech

companies were happy to operate in the

background, purely supporting financial services

activities, e.g. DueDil or Currency Cloud,

increasingly VC backed enterprises are looking

to compete directly.

The main areas of growth for Full Stack Fintech

have been in lending, money transfer, payment

processing, digital currency and equity

crowdfunding.

Transferwise is leading the way on money

transfer whilst Monese is now looking to provide

digital bank accounts, which if successful could

even challenge the basic banking business

model.

Online lending has been one of the fastest

growing segments of Fintech, with Funding Circle

tripling revenues year on year and other entrants

like Iwoca, LendInvest and Ratesetter all

increasing their share at the expense of the

banks.

Indeed in order to boost liquidity for SME’s, the

Government has already started lending through

Funding Circle, which will only result in more

growth in this area. Interestingly this is one

segment of Fintech that is actually likely to

benefit from Brexit, as fiscal and monetary policy

is loosened to enable higher levels of borrowing

where sub prime products are going to

proliferate.

The Rise of Full Stack Fintech How has Full Stack taken over th Fintech Market

Fig.3 IT Vacancies in Banking vs Development Vacancies in Banking

Fig.4 % of IT roles that are development, Banking vs FinTech

Development & Engineering in Banking

Banking IT vacancies

Banking % Fintech %

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Richard Bastin, CTO of Ratesetter

world of Fintech. We will simply get on with what we are doing best by delivering world class

2015

The explosive growth in Fintech has come at a

time when technology is increasingly automating

banking processes. Since 2005 the number of

people employed in the Banking sector in the Uk

has fallen from 535,000 to 402,000, whilst Fintech

now employs 60,000. Indeed Banking is likely to

continue to shrink, at the same time Fintech is

forecast to increase further, to over 100,000 by

2020. According to the UK Chief Science Officer,

the key technologies that will influence fintech will

include machine learning, digital currencies &

block chain, big data analytics, mobile payments

& p2p applications.

When analysing current hotspots by language,

Java dominates, whereby 27% of development

roles advertised require this, making it the largest

and fastest growing area for developers in Fintech.

This is compared to C#/C+/C++, which has been

in relative decline this year, now constituting 15.9%

of developer vacancies, down from 21% last year.

Python is the third largest, accounting for 5.2%,

interestingly though it is down year on year.

Android and IOS Developers are in increased

demand, as mobile devices become more widely

used. Also BI developers are in the ascendancy, as

the amount of data available increases enabling

better quality decisions.

Shortages of suitable candidates had resulted in

average salaries for developers increasing by over

5% year on year and now in light of the

referendum result, employers are going to find it

harder to persuade people from across the EU to

move to the UK, meaning that we forecast salaries

to go up further whilst businesses determine next

steps.

Hotspots

Salary and vacancy hotspots in Fintech

However London salaries are already significantly

higher than in other cities in Europe, meaning there is

a real danger that VC firms encourage Fintech start

ups they invest in to then outsource technical roles to

outside of the UK in order to circumvent talent

shortages and the salary premium.

Fig.5 No of people employed in Banking vs Fintech

Fig.6 Breakdown by skill

Banking Headcount Fintech Headcount

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Android C# .NET IOS Java Python

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2016

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There is no doubt that London will come under

pressure from continental rivals, seeking to position

themselves as superior places to be based, e.g. Berlin.

Indeed there has already been moves to encourage

businesses to stay, as seen in the announcement

regarding corporation tax. Brexit could also be an

opportunity for the banks, e.g. Santander

InnoVentures announced in July that it would deploy

$200m in minority stakes in fintech start ups in London.

Overall vacancy levels in Fintech are holding up since

the referendum result, whereby there has been a

slight dip, but volumes are nearly double compared

to July 2015 and the monthly average this year has

been 218% higher than last year. This is compared to

Banking in London which has witnessed a 9% fall in

the monthly average. Interestingly fintech outside

London has been significantly less impacted by Brexit

to the point vacancy volumes in the sector are now

higher regionally.

What we can see is that increasing numbers of

FinTech companies in the UK are offering products

purely for the British market.

What Next?

The future of Fintech after Brexit

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The combination of high GDP per capita, population

density, a world class education system along with

the access of capital for investment means that

businesses will continue to form to serve the UK market

first and foremost, with EU access being a secondary

consideration.

In the worst case, should the UK not secure access to

the single market, Mifid II, which is due to take effect

from January 2018, has provisions to allow companies

outside the EU to offer financial services.

Whilst these clauses have yet to take effect and are

still untested, for the UK, applying regulatory

equivalence would mean FinTech companies could

still supply FS services into the EU.

At best, the UK will be able to continue to offer

services into the EU whilst having trade deals with

other G20 countries. For Fintech businesses in London

they would have the ability to provide services across

the EEA and anywhere where there is a FTA, giving

London a unique advantage amongst global

financial centres.

Fig.7 London Banking, total vacancies 2015 vs 2016 Fig.8 London FinTech vs Regional FinTech, total vacancies 2015/16

2015 2016 London Regions

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Published Summer 2016