Sure, the rest of Europe’s got its fair share of fintech companies—think N26, Klarna, and the likes—but London remains the second most active city in the world for fintech, behind San Francisco. In fact, an impressive 9 out of 10 of the UK’s top-funded fintechs are based in the region—the odd one out being Atom Bank, based in Durham. And whilst the UK fintech industry is starting to become less focused on Silicon Roundabout, London is still home to the vast majority of the country’s fintech companies. So what is it that makes London such a good place for fintech startups and scaleups?
We’ve taken a closer look at London’s fintech ecosystem to answer this question, and analyse the state of the market in 2021. The term fintech itself covers a range of disruptive technologies in the financial services industry, from challenger banks and lenders, to payment processing startups, investment platforms, and crypto exchanges. Who are these innovators? Read on for a list of the top-funded London fintech companies to date, many of which have risen through the ranks this year, having secured fresh fundraisings in H1 (including a megadeal or two seven).
London’s fintech landscape in 2021
There are currently 847 private, high-growth UK fintechs based in London, accounting for a massive 71% of the population. Unsurprisingly, the greatest concentration of these is in the City of London local authority (182), followed by Westminster (165), Camden (100), Islington (98), and Hackney (88).
In keeping with the wider UK fintech sector, these businesses are most commonly early-stage startups, with 36% operating at the Seed stage and 28% at Venture, compared to 10% at Growth and 4% at Established. Meanwhile, 7% of the country’s high-growth fintechs have exited the private market, via an IPO or acquisition, whilst 15% have become inactive or ceased operations.
Throughout the COVID-19 pandemic, fintech has maintained its position as one of the UK’s fastest-growing sectors. And according to the City of London Corporation, the UK’s fintech adoption rate (71%) is well above the global average (64%). This is likely even higher in London, due to its vast financial and professional services industry, and thus strong demand for new technologies.
London also has an abundance of venture capital firms and fintech-focused accelerator programmes, providing equity finance and support to businesses based in the city, and is likely to benefit from the Government’s new plans to boost the sector.
Government fintech reforms
In February 2021, The Kalifa Review of UK FinTech set out its five-point plan “for supporting the growth and widespread adoption of UK fintech, and for maintaining the UK’s global fintech reputation”. The report’s recommendations included changes to UK listing rules, with one fintech (Wise) going public in London via a direct listing just this week—in what is now the Capital’s largest ever tech float.
Meanwhile, speaking at Fintech Week in April, the Chancellor laid out plans to further increase the UK’s competitive advantage, including reforms to help scale up fintech companies, and the launch of a new taskforce to explore the possibility of a central bank digital currency (CBDC).
Accelerator programmes for London fintechs
Of London’s active fintech companies, 35% have attended an accelerator programme—with 419 out of their 474 attendances (88%) having been to programmes headquartered in the region. Some of the Capital’s leading accelerators are focused solely on fintech, including Accenture’s three-month Fintech Innovation Lab London programme, offering mentoring, workshops and networking opportunities to fintech startups. Tech Nation Fintech is a similar six-month programme, specifically designed to develop early-stage fintech and insurtech companies.
It’s the Mayor’s International Business Programme, however, that is responsible for the largest number of London fintech attendances (78), whilst the Business Growth Programme is responsible for 45—both schemes are managed by London & Partners. Meanwhile, NatWest’s Entrepreneur Accelerator (formerly Entrepreneurial Spark) has also provided considerable support to the region’s startup ecosystem, having been attended by London fintechs 41 times.
Fintech investment in London
Alongside London’s long list of accelerator programmes, the city is also a great place for ambitious fintech startups to seek growth finance. Between Q1 ’11 and Q2 ’21, high-growth London fintechs secured 1,139 announced equity deals, amounting to £11.4b. The average size of these funding rounds comes to £10.6m, although median round size is closer to £2m.
These announced fundraisings saw participation from 847 different funds—by far the most popular investor type being private equity and venture capital firms (20%). Yet the most active funds during this time were crowdfunding platforms Seedrs and Crowdcube, with 131 and 85 deals into London fintechs, respectively. There are also several fintech-focused funds based in the region, such as Anthemis, Mouro Capital, Augmentum, and Fintech Circle.
Since 2011, we’ve seen a steady increase in the number and value of announced fundraisings secured each year, as London’s fintech scene has continued to grow in both size and maturity. In 2020, it brought in 203 announced equity deals, worth a combined £2.26b, compared to just 13, totalling £25.7m, ten years ago. And 2021 is already proving to be a record year for fintech investment in the Capital, with 106 deals, worth a massive £3.08b, and another six months still left to go.
