By Mark Fairlie
Much has been made since the vote to leave the European Union about the apparent threat to Britain’s finance industry. By common agreement, London is the financial capital of the world and the sector has repeatedly expressed its worries over a potential lack of passporting rights to EU countries after the separation has taken place.
These rights allow the City of London and its banks to offer financial services directly to governments, businesses, and consumers across the trading block.
Quietly though, another part of Britain’s finance sector is leading the world and it’s starting to disrupt the traditional financial companies in the UK.
The rise of fintech
Fintech describes the marriage of finance and technology within one company. The first big growth sector in fintech was the peer to peer marketplace originally launched by Zopa in the UK. Peer to peer finance allows those who have savings who want a better return than they’d get from their bank in interest the opportunity to lend money to those who need quick access to money.
The next big growth sector in fintech was the short-term loan marketplace, where consumers needing emergency financing to cope with an unexpected bill or expense could receive money directly into their bank account with little or no human intervention.
The third growth sector in fintech was unsecured business loans led by companies like IWOCA and Fleximise. Companies could borrow up to £120,000 in working capital and expansion finance and access the capital the following day.
The next growth in the growth of fintech will come in connecting those who have traditionally eschewed the banking sector. Large numbers of citizens in poorer EU countries are “unbanked” – 38% in Romania. A number of British fintech companies have set up in Eastern Europe to spread their technology and their services.
How does fintech work?
Fintech works by taking large amounts of financial data, analysing it for patterns, and forming predictive algorithms from this information. When someone applies for a loan with a fintech company, the personal data they provide is compared against these algorithms which then decide whether to lend that person or business the money or not.
As the technology has got better, more and more businesses and consumers have moved from traditional financial institutions like banks and building societies to fintech companies. The traditional sector is still far larger but, according to a report by Joblift, the gap is narrowing.
Fintech versus legacy
Joblift, a leading online recruitment platform, has compared the performance of the UK’s fintech and traditional banking systems over the previous 12 months.
Over 101,000 job vacancies were advertised by traditional finance companies paying an average salary of £36,593. On average, each job took 41 days to fill.
The fintech sector advertised slightly fewer than 39,000 vacancies, slightly under 40% of the number posted by the traditional finance sector. The average fintech salary was £45,130 and each position took 33 days to find the right candidate for.
Fintech enjoyed a 9% increase month on month in vacancies posted while the traditional sector saw a decline of 3% per month.
Brain drain to fintech?
There was a clear divide between the types of jobs that each sector advertised. Traditional financial service companies sought new accountants, finance manager, financial controllers, and mortgage advisors.
The recruitment drive in fintech was geared towards investment in and consolidation of the technical systems underlying their operations. Developers were the most in-demand at 25% of vacancies followed by data & financial analysts some distance behind accounting for one in twenty roles recruited for.
Fintech company vacancies asked for university graduates 30% of the time as opposed to the 17% in traditional finance companies.