UK fintech: Can Britain’s booming sector conquer Europe and the US?
UK fintechs have transformed the British banking landscape – and firms are fixing their eyes on international endeavours.
Top names ballooned profits and customers bases over the last year whilst picking up a fleet of accolades.
London-based Allica Bank was dubbed the UK’s fastest growing private company by The Times Hundred and Europe’s fastest growing start-up by Sifted.
Meanwhile, Revolut was listed on Forbes World’s Best Bank List featured in UK, Spain, France, Belgium, and Germany.
As they prepare for a new phase of growth following rapid expansion in the UK, the question arises: where will they secure it?
Europe: A logical leapfrog
Clearbank, an enabler of real-time clearing and embedded banking, obtained its European banking license in July 2024 allowing it to enter 11 new markets.
Mark Fairless, the fintech’s chief executive, described the move as a “major milestone” with priorities set on “building stronger momentum in that market”.
“While our focus for the near term is firmly establishing and growing our European business, we are also looking further afield in the longer term – with the US in view,” Fairless told City PM.
The US market offers a new battleground for neobanks to challenge the traditional financial landscape – though it may be a difficult fight.
James Gibson, Revolut business’ general manager, told City PM: “Europe’s much more similar to the UK for a lot of products, and maybe a more natural place for these businesses to start making the revenue as an example.”
Gibson said the UK offered a great spot to “leapfrog into Europe” with “culture making a difference”.
He said the tightness of regulation would determine the level of adaptation a firm must undergo before operating in a new market.
Whilst Brexit removed the UK from the majority of the EU’s regulatory oversight, many of its financial rules are still closely aligned.
The UK mirrors the EU’s Payment Services Directive with its rules on strong customer authentication, open banking, and payment services under the Payment Services Regulations 2017.
Likewise, it follows EU-style anti-money laundering rules under the Money Laundering Regulations 2017, with comparable requirements for know-your-customer (KYC), risk assessments, and suspicious activity reporting.
This helps streamline fintechs entry into the new markets and offers a logical starting point as they look to opportunities outside the UK.
US: A fresh set of challenges
Fairless noted entry into the US would host a “different set of challenges” due to its “competitive landscape”.
Fintech juggernaut Revolut has slowly entered the US market, but not without headaches.
The firm currently operates through partnerships with the likes of Lead Bank to offer some services but lacks a banking license that would allow it to offer its full suite of products.
The neobank giant lodged a draft banking application with the Federal Deposit Insurance Corporation (FDIC) in March 2021. But it is still yet to submit a formal application after a batch of feedback from regulators.
Revolut also faces fierce competition from entrenched players Chime, SoFi and Cash App, which have cemented their brand loyalty status with American consumers.
Traditional lenders such as JP Morgan Chase and Bank of American continue to dominate the landscape, and the absence of banking license and inability to roll out a full breadth of services pose a severe burden.
But Gibson said the fintech’s business lending arm had seen a growth in the amount of customers seeking to expand into the US.
Operations for Revolut business have ballooned over the last year after its monthly active businesses topped 250,000. This was fuelled by 20,000 new businesses joining each month.
UK: A global trendsetter?
Chief executive of Abound Gerald Chappell told City PM the firm was “actively looking to launch in countries that are following the UK’s lead and will be lending in several within the next year.”
He hailed the UK’s incorporation of open banking and viewed expansion through the lens of countries “who follow suit”.
The UK has helped lead global fintech development through early adoption and innovation of open banking platforms and instant payment solutions.
It has been a pioneer in integrating technology with everyday banking, offering user-friendly mobile apps, budgeting tools, and cross-border payment services that have set global standards.
City PM reported earlier this year London was a singular point rating behind taking New York’s crown as the world’s leading fintech hub, according to Z/Yen’s 37th Global Financial Centres Index (GFCI 37).
Chappell suggested this unique selling point could make UK fintech a “major export sector and a real driver of economic growth for the UK”.
The government may be recognising this potential with the eyes of the industry waiting for Chancellor Rachel Reeves’ Financial Services Growth and Competitiveness Strategy on July 15.
Reeves promised to make the UK “one of the best places in the world for fintechs to start-up, scale-up and to list”.
The government’s backing could help drive fintech firms from being UK leaders to shaping the future of global finance.