Nine of top 20 UK fintech deals were completed post-referendum, with investment totalling $368 million, according to a new report by Startupbootcamp’s London fintech programme in conjunction with PwC.
As a testament to the strength of the UK fintech market, the report also revealed that today’s British fintech start-up works on a robust model that puts customers first through an investment into technologies like artificial intelligence (AI).
Fintech start-ups are increasingly focusing on building smarter, faster machines as they seek to gain a better understanding of artificial intelligence and its potential to solve customer problems. This according to data compiled from hundred of start-ups and financial services companies, which also reveals that almost one in seven applications to the Startupbootcamp incubator programme in 2016 looked to build new prototypes, many of which were focused on AI and machine learning.
Artificial intelligence: do investors care?
Over the past few years, the focus on AI and machine learning has been driven by a need to further understand and develop the technology with no clear concept of how to implement it in daily life, according to the report. Recently, many more start-ups have begun working with financial services firms, using this technology to identify and solve real-life customer issues. Enterprise Bot, a member of the 2016 Startupbootcamp cohort, for example, used AI to develop virtual assistants who can be used by banks to improve customer service.
However, investors may be slow to realise the opportunity. The report shows that for many investors, it may be too soon to invest in smarter, faster technologies. Investment in this space, particularly in blockchain, is being driven predominantly in-house by financial companies themselves. Despite one in seven applications to Startupbootcamp are from start-ups banking on high tech solutions, just 9 per cent of investment focused on this area.
The UK will remain a global fintech hub
UK-based startups made up 34 per cent of all applications to Startupbootcamp in 2016, up from 22 per cent the year before.
Despite warnings from industry experts, the UK’s fintech sector has continued to grow following the EU referendum, with fintech ‘bridges’ being built between London and China, South Korea, Singapore, India and Australia. In fact, Startupbootcamp has seen UK-based businesses find new ways to tackle difficult financial challenges and apply those solutions in emerging markets.
However, like other sectors, fintech is not immune to the uncertainty surrounding Brexit. Regulators across Europe and further afield are following the UK’s example of creating an agile and innovative start-up friendly environment. Concerns around Brexit have been minimal and mainly hypothetical, explained by the fact that most early stage startups tend to be predominantly focused on their domestic market.
Collaboration is key: relationships between start-ups and incumbents mature
Early perceptions of fintech are shifting. Where start-ups were once seen as a threat by existing financial services players, the emphasis is now on collaboration. While it has taken a while for start-ups and incumbents to find ways to work together, Startupbootcamp and PwC have witnessed a clear increase in cooperation to solve important problems – both for customers and for the companies themselves.
As the relationship matures, incumbent financial services firms continue to struggle with measuring and reporting their success partnering with start-ups. Nevertheless, the atmosphere of collaboration and mutual understanding is positive and expected to accelerate.
This article was originally published in http://www.growthbusiness.co.uk by Praseeda Nair.