Why isn’t London’s fintech sector as rampant as San Francisco’s tech industry?
Photo by Tim Alex on Unsplash
London is the home of the world’s fintech industry, and understandably so. For centuries, the British capital has dominated banking and continues to do so until this day.
Even so, London’s financial industries don’t seem to have the market might, power and gravitas as San Francisco’s impressive technology companies. None of them have market caps approaching the size of Google, Tesla, Amazon, Nvidia, and Microsoft.
What’s going on?
New data is starting to provide answers. Commentators and experts are getting a better picture of why the UK’s primary innovation sector seems to be lagging behind and what can be done about it.
Focus
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At the core of the problem appears to be something quite philosophical – focus and ambition. While San Francisco is obsessed with human advancement and “breaking things” on the way to getting there, London’s atmosphere isn’t the same. While there is plenty of competition in the city, there isn’t the kind of maverick drive that seems to propel its all-American counterpart.
Fintech companies expressly don’t want to disrupt everything. Instead, their goal is to simply make things better in an already-established industry. A financial version of AI isn’t something that’s likely to emerge from the sector any time soon.
Regulation
At the same time, London suffers from quintessentially British regulation. Even if entrepreneurs did want to rock the boat, they wouldn’t be able to with the Financial Services Authority (FSA) and governments breathing down their necks. The business environment is just wrong.
Added to this is the Brexit complication. London retains many of the laws inherited from the EU and the conservatives failed to roll back the tide to generate wealth. As such, the city remains just as stultifying as it ever was, perhaps even more so.
With that said, a new breed of fintech lawyers is trying to smash the status quo and help firms with the sectoral challenges they face. Their goal is to help companies manage their technology better so they can follow regulations while also gaining competitive advantages.
Maturity
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There’s also the issue of the maturity of London’s financial sector. Because it’s been around for centuries, any attempt to build on it seems archaic and not particularly interesting. Investors label fintech firms as “ineffective,”
By contrast, San Francisco’s tech sector never had that legacy. The modern understanding of it really began when Steve Jobs introduced the Apple Mac in the 1980s. Before then, it was just a few labs making transistors.
If London wants to catch up with San Francisco, it will need to rethink how it brands itself. Maybe then, it can attract American levels of investment.
Funding
Lastly, the primary issue facing London’s fintech sector is funding (or lack it). It doesn’t have the billions to play with that Google and Microsoft got during their formation.
Part of this has to do with the UK’s constantly changing regimes. Business owners don’t know where they stand. However, it might also relate to Brexit and uncertainties over the long-term viability of the economy.
Overall, London’s fintech sector continues to grow. But without significant policy changes, it won’t dominate.
