Fintechs gear up for revenue surge but worries persist

● The 2017 UK Fintech Census suggests that a third of firms are eyeing an IPO

Half of UK financial technology businesses expect revenue growth to double in the next year but question marks remain around customer adoption and attracting qualified staff, according to a major new report.

The 2017 UK Fintech Census, conducted by professional services giant EY and Innovate Finance on behalf of the Treasury, paints a broadly positive picture for the year ahead.

About half of the fintech businesses polled expect global revenue growth of 100 per cent or more in the next 12 months.

The census also found that fintechs have received an average of £15 million each in investment to date. Looking at future funding, half of all respondents say they expect their next funding round to exceed £2m, with 35 per cent anticipating more than £5m.

Collectively, the next round of fundings are expected to raise £2.5 billion, while a third of firms reckon that an initial public offering (IPO) is likely within the next five years.

Europe and North America are seen as the key places for future expansion as UK fintechs look to bolster their headcounts.

However, the industry believes it faces a number of challenges in recruiting the right talent. Respondents pointed to coding and software development as the most difficult skills to find when recruiting, followed by product and sales skills.

Another key concern is that customer adoption rates won’t be sufficient to build the size of the user base. Almost half the respondents (49 per cent) cited this as one of the biggest challenges facing them in 2017.

It comes in the wake of a recent study – also by EY – which suggested that levels of financial technology adoption among the general public had surged globally over the past 18 months with the UK leading the way among developed nations.

One in three “digitally active” consumers is now using fintech on a regular basis, following a sharp increase in take-up in both developed and emerging economies.

Financial technology is one of the fastest-growing parts of the UK economy, employing more than 60,000 people and generating in excess of £20bn in revenues annually. With a major financial services sector and several tech start-up initiatives on the go, Scotland has been touted as a potential leader in the field.

Imran Gulamhuseinwala, global head of fintech at EY, said: “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.”