UK fintechs to watch

  • By Joseph Sharangparni

RFi Group lead analyst Joseph Sharangparni assesses the UK landscape against political uncertainty such as Brexit and uncovers fintechs who are still challenging the status quo.

Over the last few years there has been an increasing focus in the banking world on fintechs. Broadly defined here as an institution whose main purpose is to use innovative technology to drive greater convenience in the financial services sector for customers. 

There is no denying that the UK has seen an explosion of these types of companies over the last 5 years, turning the nation into a proverbial battleground for financial services.

Following news in February 2020 that German-based fintech N26 will leave the UK in April due to an inability to operate under a European banking license after Brexit, one key question relates to the position of other providers within the market. 

Globally speaking, Brexit does not seem to be hindering investment in UK fintechs – where over 2019 the UK saw a 38 per cent boost in investments, drawing in over US$4.9 billion, placing the country second behind the US, topping India and China – whose investments decreased 93 per cent since 2018.

UK fintechs are certainly becoming important disruptors within the market, after sweeping the customer-voted British Bank Awards (which receives over 18,000 votes for 160 firms to determine finalists), fintech Starling Bank won awards for the ‘Best British Bank’, the ‘Best Current Account’ and also the ‘Best Business Banking Provider’, comparatively, popular neobank Monzo also won the award for the ‘Best Mobile App’. 

Undoubtedly these two providers will continue to compete for market share over the coming year- with Monzo being valued at ₤2b billion in June 2019, and Starling Bank toting ₤1.5 billion in customer deposits as of February 2020- the two have very different approaches to disrupting the banking landscape, and whether customer volume or value is the better focus for fintechs is yet to be determined. 

Momentum continues 

Both are yet to turn a profit, whereas lesser known fintech Oaknorth are a member of this exclusive club, reaching this within its first year of operation (although Anne Boden, CEO of Starling Bank has pledged this by the end of 2020).

Rivals Monzo and Starling Bank currently lead the consumer market in terms of awareness, as data from the RFi Group’s Digital Banking Council shows – When comparing data from 18Q4 to 19Q4, awareness of Monzo increased from 22 per cent to 50 per cent, Starling Bank saw increases of 15 per cent to 43 per cent, while overall awareness for the total market for any fintech increased from 56 per cent to 79 per cent. 

Although use of fintechs across the consumer market still has a distance to travel, with 1 in 4 consumers having used any fintech, 6 per cent having used Monzo, and 3 per cent having used Starling Bank.

For the SME landscape, RFi Group’s UK SME Banking Council shows Starling Bank’s awareness increased to be the highest from 18 per cent to 42 per cent over a 12-month period, ending in November 2019. With Monzo’s business account waiting list currently open- it appears the two will be vying to be the model FinTech in both sectors of the UK, and as RFi Group data shows- SME awareness of Monzo sits marginally behind Starling Bank at 39 per cent, with this in mind it is inarguable the two will soon be competing as fiercely as in the consumer space.

Now of course Monzo and Starling Bank are not the only two fintechs to watch within the UK market, this is but the tip of the iceberg and we have not touched on the likes of Revolut, TransferWise, Atom Bank, Funding Circle, Tide, and potentially hundreds if not thousands of others depending on how specific one defines a fintech, or which sector of financial technology is of most interest. 

Nevertheless, the rivalry of these two coupled with rapid growth, awards, highly successful funding rounds, with Monzo moving towards a US launch, and Starling Bank maintaining the intention to expand in Europe, is indicative of the competition in the financial services sector that does not appear to be slowing down despite even political uncertainty.

UK Digital Banking Council
UK SME Banking & Payments Council