The survey ‘The Fintech Disruptors Report 2018’ included 25 in-depth interviews with senior executives from fintechs and financial institutions, supplemented by an opinion survey of more than 5,000 industry professionals.
The impact of Brexit on the fintech sector was largely dismissed in 2017. However, this has changed in the 2018 iteration of Fintech Disruptors: only 35% of respondents in 2018 believe that Brexit will have ‘limited or no short term impact’ on the fintech sector (compared to 52% in 2017), whilst the number of those believing that Brexit will ‘impact the growth of European fintech in the next year’ has jumped from 19% in 2017 to 27% this year.
Further support for the view that Brexit could negatively influence fintech across Europe is seen in fintech industry leaders’ reduced belief that Brexit ‘will accelerate growth in other European fintech hubs’. Last year, some 45% of those interviewed saw this as a possibility, down to 38% of respondents this year.
Simon Hardie, Partner at MagnaCarta Communications, which runs Fintech Disruptors, noted: “Our findings this year suggest a marked shift away from opinion recorded in both our 2017 study and recent work by PwC suggesting that Brexit will have next to no effect on fintech in the short to medium term.”
PwC’s study, published earlier this year, suggests that ‘many of the factors [that underpin London’s pre-eminence] remain unaffected by Brexit’, and that, ‘the UK’s fintech sector has continued to progress since the Brexit vote’.
To some extent, our study concurs with PwC’s findings, in as much as those predicting decreased investment in UK fintech owing to Brexit have declined in number from 36% in 2017 to 31% today. However, when asked which regions will be the world’s biggest fintech hubs in 2020, this year’s respondents overwhelmingly identify a shift away from the UK (down 14% to 53%) and the US and Canada (down 10% to 69%) towards China, with 58% of respondents predicting China will be the world leader in fintech in 2020, an increase of 17% over last year.
Respondents also believe there is slightly less chance that the wider Europe will be a fintech leader, with Europe declining by 5 percent in our interviewees’ estimation to 37%. Interestingly, venture capital (VC) investment in Asia, including China, actually declined by more than 50% from US$8.3bn to US$4bn between 2016 and 2017. By contrast, VC investment in US fintech grew by more than 40% over the same period to US$8bn.
Taken together, these results suggest an industry in flux, with the possibility of a defined shift in the centre of gravity from Europe to Asia, and specifically China. Although Europe and the UK are still very much in the fintech game, there is a need for more coordination and collaboration across the European fintech industry to maintain momentum. In the new digital landscape, no fintech, financial institution or country can stand alone or can be said to be, as Donne put it, ‘an island, entire of itself’.