Half of UK FinTechs expect revenue growth to more than double in the next year but question marks remain around customer adoption

Next fundraising round expected to exceed £2.5bn across the industry with a third expecting to float in the next 5 years

LONDON, 7th September; A census of UK FinTech firms by EY and Innovate Finance has found that half of respondents are extremely positive about their revenue growth for the year ahead, although many see challenges ahead in sourcing talent and the rate at which customers are adopting FinTech services.

The 2017 UK FinTech Census, based on a study of over 245 FinTech companies and conducted on behalf of Her Majesty’s Treasury, reveals that half of respondents are expecting global revenue growth of over 100% in the next 12 months. Historical average UK revenues, another key indicator of success, grew by 22% between 2014 and 2016, where average revenues reached £5m.

The census also found that FinTechs received an average of £15m in investment to date. Looking at future funding, half of all respondents say they expect their next funding round to be more than £2m, with 35% anticipating more than £5m.

In aggregate, FinTechs expect a total of £2.5bn for their next funding round, and 33% of respondents expect an initial public offering (IPO) to be likely in the next five years.

Europe and North America are the two most important regions for future expansion, according to the census results, as larger FinTechs look to build talent bases abroad.

However, the industry believes it faces challenges in recruiting skilled talent. Respondents feel that coding and software development would be the most difficult skills to find when recruiting (78% of respondents rank this in their top three), followed by product and sales skills.

Based on the census, another key concern for the industry is the worry that customer adoption rates won’t be sufficient to build the size of the userbase. Half the respondents (49%) cited this as one of the biggest challenges facing them in 2017.

Imran Gulamhuseinwala, Global Head of FinTech at EY, comments: “It is fascinating to see the ambitious growth plans of UK FinTechs, both in terms of hiring new talent and expansion into new markets, which will continue to drive revenues and investment in the sector.”

Their concerns about the availability of talent and the uptake of FinTech services by customers are very real, however. The calibre of people leading and running FinTechs is a fundamental pillar to success – as is the future pipeline. Without a large and diverse talent pool, the industry will struggle to retain its ability to innovate. Additionally, the concerns about adoption rates should be addressed as this is fundamental to future success. There are some real issues highlighted here that need to be seen alongside the otherwise very positive findings.

Charlotte Crosswell, Innovate Finance Interim CEO, adds: “The United Kingdom is an influential global FinTech leader but as the census findings reveals, we must continue to attract the talent we need to continue our growth and to help drive a more competitive, transparent and inclusive financial services sector.”

Stephen Barclay, Economic Secretary to the Treasury, said: “FinTech is saving millions of people time and money by transforming how we use financial services. The FinTech census shows a thriving sector and we are committed to ensuring that the UK remains the best place in the world to start and grow a FinTech business.”

The 2017 UK FinTech Census was carried out by EY and Innovate Finance on behalf of Her Majesty’s Treasury and was designed to gather key insights directly from FinTechs, charting key areas of growth, as well as potential challenges. Data was gathered on the specific areas of revenues, investment, talent, regulation and future expansion. The 245 respondents in the study provide a strong sub-sector representation, with the largest representation from payments and remittances, and financial software. The average age of FinTechs in the study is 5.3 years, with a peak in the number of companies founded in 2014.

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