October 5, 2016
London is long known to be one of the world’s hubs of innovation with a wide range of disruptive startups coming from the UK’s capital. Along with Hong Kong, Singapore, Silicon Valley and New York, London is a place of tremendous opportunities for bright entrepreneurs.
The feeding frenzy for innovators in London, however, has been at a question after certain political events. Some estimates suggest that after Brexit, London’s FinTech funding took a hit. As reported by the Financial Times, VC funding for global FinTech companies grew nearly 150% in the first half of 2016, registering $13 billion of investment compared to $5 billion in the same period last year. Meanwhile, funding for UK companies declined by a third - in the first half of 2016 companies raised $386 million of investments down from $580 million for the same period last year.
One of the countries responsible for growing pressure on UK’s FinTech is China. In Q1 2016, FinTech companies in China attracted $2.4 billion from venture capital firms in nine deals, which accounts for 49% of the $4.98 billion in investment in the space recorded globally.
Moreover, out of 27 FinTech unicorns spread around the world, 14 are from the US, 8 from China and 5 from the rest of the world. Although China is on the second place by the number of unicorns, the country consolidates the most financial power even with fewer representatives – China-based unicorns are worth over $96 billion in valuation.
For comparison, America’s unicorns’ valuation is at $31 billion and the ROW – $11.5 billion. No region is anywhere close to China with its power team BAT (Baidu, Alibaba and Tencent) – the GAFA of the East. In addition, the domestic regulatory environment is one of the most welcoming for entrepreneurs globally (even more so with Hong Kong launching a regulatory sandbox for FinTech).
Raymond Cheong, a partner with KPMG China, noted that with innovation occurring across a number of sectors, consumers are increasingly looking to avail of technology and liquidity within the China (venture capital) community. This creates a perfect storm in terms of achieving these high levels of FinTech investments.
But China is not the only rival looking to displace London as the world’s leading FinTech hub. Singapore has been widely recognized as one of the gateways of the Asian financial market with a rich FinTech ecosystem. Singapore’s government is one of the most progressive entities that aims to actively support and foster innovation. The Monetary Authority of Singapore is one of the financial authorities internationally to launch a FinTech Regulatory Sandbox.
The FinTech Regulatory Sandbox by MAS is not the first initiative by the governmental structure to endorse innovation. Last July, MAS also launched FinTech & Innovation Group (FTIG), which is responsible for regulatory policies and development strategies to facilitate the use of technology and innovation to better manage risks, enhance efficiency, and strengthen competitiveness in the financial sector.
In November 2015, The Prime Minister of Singapore urged the country’s banks and regulators to keep up to scratch with technological developments such as blockchain technology. As described by Deloitte, Singapore is a leading international financial center and a serious contender for the global number one spot in FinTech. Reuters has recently reported that Singapore is attracting interest from among the ~60,000 FinTech firms based in London’s near-$9 billion market – a trend likely to accelerate with Britain’s referendum vote to leave the European Union. In addition, some professionals add that Singapore can offer better access to new markets such as abovementioned China, India and Indonesia compared to London.