3 Barriers UK FinTechs Face in 2022

June 29, 2022

UK FinTechs continue to innovate financial services. But what obstacles do they face in an ever-more competitive technological environment?

Woman with a phone in her hand between futuristic skyscrapers

FinTechs are at the forefront of change in UK finance.

The UK financial services environment is already conducive to their growth, with FinTechs receiving £2.4bn in equity funding in Q1 2022. With significant investment being made into new ways of improving accessibility and security in finance – including Buy Now Pay Later loans and AI-powered Know Your Customer (KYC) security checks – there is no question that FinTechs are essential to the industry’s growth. 

Yet there remain barriers to the development of FinTechs in the UK. A constantly changing regulatory and legislative landscape, recruitment challenges in certain integral areas such as data analytics, the need to develop strong partners in order to succeed in scaling operations. Without investing in these crucial elements of any startup’s growth, the returns will be limited. 

Let’s find out some of the stumbling blocks faced by UK FinTechs. 


Slothful legislation 


One of the key blocks on FinTech progress is an overabundance of regulation. The UK financial services sector has, since in 2018, been a leader in Open Banking due to its favourable landscape for the application of tech to finance. However, the ability of regulations to hinder FinTech scalability has been cited as a flaw in the UK’s approach to financial technology.  

The UK’s proposed Data Reform Bill is due to release the regulatory burden on the use of smart data in financial services as well as other industries. The Bill promises to enhance the regulatory sandbox which currently differentiates the UK FinTech sector to that of the European Union and has allowed 137 FinTechs to test their products and services in a safe environment, of which over half successfully completed testing. Financial services regulators will also take responsibility over regulatory requirements in the area of payments, allowing them to quickly adapt to emerging technological trends without having to wait for legislative approval. 

This new landscape means FinTechs have been granted much more freedom to scale without significant hindrance from regulations.  



Recruitment hold-ups 


Some capabilities on which FinTechs rely often face recruitment issues. Roles in software development and data engineering have seen significant shortages in recent years. 46% of firms struggling to recruit for data-related roles. FinTechs face a particular pressure in that they must not only recruit wisely, but also maintain the people who have been part of the firm since its founding. That’s not to mention the competition FinTechs face in the recruitment stakes from larger financial institutions, with many banks capitalising on their brand presence to snatch top talent. 

Critical Software’s Hypergrowth approach can help recruit talent quickly and – importantly – keep that talent within the firm. The approach sets out a clear journey for new joiners and a culture of positive collaboration is fostered whereby discovering, planning and ownership play integral roles in the management of projects.  


Partnership problems 


Partnership is essential to a successful FinTech. Getting it wrong could jeopardise the future development of the firm. But doing without it could be equally damaging, especially in a sector facing significant capability shortages in some fields. 

In the UK, successfully navigating the skills journey from startup to larger firm is paramount. A key part of this is ensuring capabilities, like FinTech software development, are managed effectively during the scaling process. While UK FinTechs received just over £30 billion in funding in 2021, more than seven times that which it received the previous year, high inflation and rising interest rates mean investors are being more judicious with regards to their investments. FinTechs will therefore need to demonstrate clearly how they’re using funding to upscale their business and talent and deliver returns.  

Partnering with companies with the knowledge and competencies they lack could provide an answer to these great expectations from investors. Through proactive collaboration, FinTechs are able to neatly integrate a partner’s teams into their projects, giving the FinTech the resources it needs to fill competencies without causing disruption to the existing team. 


FinTech’s future 


FinTechs in the UK face an exciting and prosperous future. With the right investments in talent acquisition and retention and a legislative landscape that encourages innovation, FinTechs will be able to deposit numerous benefits into financial institutions, from banks to insurance brokers, in their digital transformation journeys.  

Keen to discover how Critical Software can play a role in your FinTech’s scaling up process or provide the capabilities you need to stand out from the crowd? Check out how we can help here.  

While you’re here, why not get in touch with our Business Development Manager, Christian Schultz, to start your investment in a more prosperous FinTech future.