Edition 52: The Decline of London Fintech: How the Fintech Crown Slipped.

Hello folks,?

Welcome back. I have put off posting this for a while but, after asking on my socials,? “is it just me or are all fintech bodies just set up to shill accounting firms’ consulting work?” and having a flood of DMs from people agreeing but not wanting to be named, then I thought I would follow up on it.?

Another trigger was the recent publishing of Labour’s plan for financial services, which, for me, really encapsulated a big part of the issue I'm talking about today: if you ask the wrong people, you get the wrong answers.

What? I’m really asking is: has the UK, and more specifically London, massively screwed up??

It feels like we have lost focus on what matters most and are spending too much time patting ourselves on the back in Downing Street events and at fancy conferences about the things we used to do well, and the success we used to have, losing focus on actually continuing to do them well and building on the ecosystem that led to the success in the first place.

Let's double-click on this…

What went right???

In the dynamic landscape of finance and technology, cities vie for the coveted title of being the global epicentre of fintech innovation. London's ascent as a fintech powerhouse was not a stroke of luck but a result of strategic positioning. For years London proudly wore that crown, hailed as the fintech hub of the world. However, recent shifts in the industry have seen this crown slip, with other cities rising to prominence.?

The London fintech and financial services ecosystem was created through a few pressures that, if you want to get up to speed with, there is a handy documentary 11:FS created that something silly like 240,000 people have viewed here: https://www.youtube.com/watch?v=59erwsHe5CI&t=41s

Generally speaking, the environment was created because London had a rare combination of the following ingredients all within the small container of the M25. For international readers, that's a big road all the way around london… think of it like a moat but with 3 lanes of car traffic, not water!

The main 4 of these are that we had:

1. Capital - People putting money into making the future different from the present.
2. Regulation - A group of regulators that were pro competition and created pressures on existing players to step their games up through introducing new players to the market. Also, the inclusion for the UK to be a jump-off point for Europe and a sandbox for the wider world.
3. Big Banks – A number of large organisations dealing with problems around culture, technology and purpose. If everything was awesome, there wouldn't be opportunities for new or old players.
4. Talent - London was a magnet for talent from all around the world and a welcoming place for them.?

You could talk to the regulators, investors, and customers all in one day and attract the best international talent from all around the world in order to make the business successful.

So what went wrong?

Just like the heavyweight boxer who got up at 5am to run 15 miles, drink 12 eggs, and pummelled the hanging meat in the freezer (Rocky anyone?!) before letting himself go once the championship fight was fought, London has got a bit flabby.?

The runs are shorter, the opponents are getting stronger and we now seem more focused on putting out a book and telling stories of the good old days rather than these days being the good ones.

What is wrong now?

“Bodies” - Where there was once crack teams of people doing and thinking, we now have bodies created that are very, very sanitised “think” groups seemingly positioned to sell consulting services for accounting firms rather than materially moving forward the agenda. This is far from the provocative past of Innovate Finance, Level39 or many other players driving forward the agenda and having a significant impact on the industry and how it thought and acted. So much of this landscape has been sanitised and swallowed up by the controls of the incumbents, all of which has led to these bodies being stifled.

Leadership - I'm not sure the people in power are aware of what it took to get the power in the first place. They were not there and do not know how to create lightning let alone control it. This goes for those within those bodies but also within the government. If the people you ask are wrong you are going to get the wrong answer - see Labour manifesto for financial services I mentioned earlier.

UK Media Sensationalism - Alison Rose, Nic at Revolut, Monzo witch hunts… our UK media industry has done a good job tearing down many businesses and individuals who set out to change the industry. This isn't the same all around the world. The USA has a more open view to supporting the winners and not bringing them down. What is wrong with us?

Competition - The playing field has been levelled with many of the regulations set to create competition being watered down, decreasing the chances for new players in favour of the incumbents.

Focus Dilution - We seem to be obsessed with telling those non-London places what they should be doing and setting them up to be a fintech success story. This distraction with the rest of the UK like Mancheser, Leeds, and Cardiff has meant we have stopped doing the work we need in London. I live in Norwich… it isn't that I hate everywhere but London, but we cannot tell others how to do something well unless we are doing it well.?

Regulation - The direction of the regulation is not working. We used to have progressive and dynamic leadership and engagement with the community and I just don't see it or feel its impact any more. While initially hailed as a boon for fintech innovation, regulatory uncertainty surrounding Brexit has cast a shadow over London's fintech ecosystem. The loss of passporting rights and concerns about data flows and talent retention have prompted some fintech firms to consider relocating to other EU hubs with more stable regulatory environments.

Brexit - Brexit has pushed the most talented people away, making them feel uncomfortable and unwanted here. Even for those who want to come, the visa process doesn't work well. The uncertainty surrounding Brexit, coupled with the allure of alternative fintech hubs, has led to a talent drain in London. Skilled professionals, particularly those from EU countries, are increasingly exploring opportunities elsewhere, dampening London's competitive edge in attracting and retaining top talent.

Emerging Contenders for Fintech Supremacy

As London's fintech dominance wanes, several cities have emerged as frontrunners in the race for fintech supremacy:

Singapore: Positioned as Asia's fintech hub, Singapore offers a well-regulated environment, access to Asian markets, and government support for fintech innovation.

New York: With its deep pool of financial talent, robust regulatory framework, and proximity to Wall Street, New York remains a formidable player in the global fintech ecosystem.

Berlin: Known for its vibrant startup scene and tech talent pool, Berlin is quickly gaining recognition as a leading fintech hub in Europe, attracting investment and talent from around the world.

Shanghai: China's financial capital is emerging as a fintech powerhouse, leveraging its vast market size, technological prowess, and government support for innovation.

Zurich: Switzerland's financial hub offers a stable regulatory environment, access to capital, and a strong tradition of financial innovation, making it an attractive destination for fintech startups.

Riyadh: Saudi as a whole feels like London in 2014 - the regulation changes, customers needing more capital than most countries’ GDP - the magnet is strong for people who want to disrupt.

Fintech’s Pop Moment

This isn't the ranting of a punk craving for the early days of the scene and lamenting the rise of pop music, but someone deeply connected to the scene and who understands that it just isn't the same as it was. I’m deeply concerned we are spending too much time talking about the old days and have missed that we are no longer creating the environment that gets us to be the world leader.

People will point at investment, or scaled fintech or whatever but we all know the fact that this just isn't working right now in the way it was and unless serious changes take place we will keep falling back in the rankings and keep losing pace with the potential we once had.?

While London may have lost its crown as the undisputed fintech hub of the world, all is not lost. The city still possesses a wealth of resources, including a deep talent pool, robust infrastructure, and a supportive ecosystem of investors and policymakers. To regain its competitive edge, London must address the challenges posed by Brexit, double down on efforts to attract and retain top talent, and continue to foster innovation through supportive policies and initiatives.

While London's reign as the fintech capital may have waned we are at a key point where we can either retire and continue with our book tour mentality, or, like Anthony Joshua in his last fight, realise that we might be running out of shots to set ourselves straight and get this thing back on track.?

I miss London - it was a beautiful thing; I hope we get back to it.