The Race To The Top

UK fintech's reputation for innovation and disruption is coming under threat from other sectors.

Tech disruption has transformed business systems. In some cases, it upended entire models with artificial intelligence, machine learning, the internet of things (IoT) and driverless cars. So, where does fintech fit into this picture?

A recent report from PwC suggests that the reputation of financial services as a tech trailblazer in the UK may be under threat, lagging behind that of the hospitality, airline, transportation and home entertainment industries and still lacking a new entrant capture “significant market share.” Fintech is hard to crack, and the “labor to evolve” could cost the sector a potential $128 billion, according to PwC estimates.

“Incumbents may well seek to address their technology and innovation gaps through acquisitions and partnerships,” explains Andrew Kail, PwC’s head of financial services. “However, delivering value from these arrangements has proven notoriously difficult for the traditional players.”

The same conclusions don’t appear to be the case at the global level, when you consider the blockbuster year calculated by international technology M&A advisory Hampleton Partners, which counts 439 fintech transactions in 2019, reaching a record-breaking $130 billion in disclosed value. These include Fidelity’s acquisition of Worldpay ($44 billion), Fiserv’s acquisition of First Data ($22 billion), the London Stock Exchange Group’s acquisition of Refinitiv ($14 billion) and the merger of Global Payments with Total System Services ($21 billion).

“Fintech investors are, and will continue to be, very selective in deploying capital,” says Jonathan Simnett, director at Hampleton Partners. “With large technology companies knocking at their doors, incumbent financial institutions must continue to engage aggressively with fintech disruption, whether by building their own capabilities, by partnering, or by acquiring.”

Through 2020, the global payments space is expected to enjoy an abundance of investment, with insurtech, regtech, wealthtech and B2B platform services all well-positioned for growth.