Fintech. The meeting of financial services and technology. Is it the big new hope for Manchester? A threat to traditional financial services and chunky space requirements? Or the latest flavour of the month? Neil Tague finds out.
According to an EY report commissioned by the Treasury, UK fintech has grown from disruptive roots to be worth £6.6bn a year in 2015. The UK is undoubtedly well-placed, behind only California in terms of people employed and having the strongest supporting ecosystem, according to EY’s benchmarking. Figures from Accenture show that the UK and Ireland accounted for two-fifths of European fintech investment in 2014.
But it’s a London-dominated story thus far. Only 31 of the top 100 start-ups listed in May by startups.co.uk were outside London. In a September 2015 listing of the 17 hottest UK fintech businesses to watch, only Exeter’s Crowdcube broke the capital’s monopoly. There is a need, said EY, for regional centres of excellence to be established, so the time is ripe for Manchester to stake a claim.
Moneysupermarket moved its More Money app team into Manchester in April. In May, David Newman left Barclays Wealth in Manchester to focus on Delio, the digital investment platforms builder he co-founded in 2015. There are already existing success stories; as far back as 2011, online payment service App55 won the Startup Award at the Northern Tech Awards.
In May, Manchester-based cloud payments business AccessPay secured a £1m package through Barclays to support its growth, the first in Manchester to benefit from the bank’s new Innovation Finance product. Barclays is a leader in fintech, with its Rise centres acting as a physical and digital community. Its Manchester hub is one of seven globally, and the only UK branch outside London.
Tom Cheesewright, the Manchester consultant who has become a BBC fixture on all matters tech, said: “There’s not yet a massive fintech scene in Manchester. Thus far, it’s probably fair to say Leeds has been stronger, because it has that background of customer contact centres and back-end processing in finance, the ecosystem from which fintech entrepreneurs emerge.”
Investment bank GP Bullhound agrees. Of the 12 North West companies it identifies as having “unicorn potential”, a description of tech firms started post-2000 worth at least $1bn, most are in traditional areas of regional strength, such as retail or security.
According to Alison Loveday, chief executive of law firm Berg, it is the emergence of alternative finance, lenders outside of the high street banks, comprising peer to peer lenders, crowdfunding platforms, and IP-backed finance, that is driving growth. However, she reckons banks and smarter developers have already moved with the times: “The growth of fintech can be seen through the big banks’ change in mentality and implementation of various programmes in an attempt to keep up, as seen by Barclays’ new ventures into start-up and SME growth programmes, and the creation of the Vault as a collaborative space in Spinningfields for tech businesses and traditional finance professionals.
“The growth of alternative finance has been helped enormously by technology. Large institutions will find it difficult to develop the new innovative technologies themselves but they recognise that they may be able to adopt the technology further down the line, once it has been developed by a fintech entrepreneur.”
Will Lewis, director of OBI Property, said that the old rules don’t apply, and that we shouldn’t define financial services in too narrow a way: “You can argue that the large supermarkets and traditional insurance firms are fintech, because they all have specialist tech teams working on new areas”, he said. “It’s almost a sub-sector, and it could boom in the next 12 to 18 months.”
The Vault will be part of a 20,000 sq ft floorplate at Allied London’s XYZ Building, having been held back as part of the philosophy that XYZ can be more than just an office. It will be accessible to enterprise and innovation companies at a lower entry level than is the norm, as Allied looks to create the North’s premier collision point between tech innovation and finance.
Spinningfields estate director Chris Reay said: “Spinningfields has disrupted Manchester’s traditional commercial core and has become a place where leading financial institutions are clustered, from the main banks to newer organisations such as Worldpay.” The online payment processor took 22,000 sq ft at 3 Hardman Square in 2013.
Reay continued: “Where XYZ differs is that we’re delivering a culture, a brand more than a building. We think this is the ideal location for fintech. We’re opening doors for tech entrepreneurs to collaborate and tap into support from the existing corporate environment, whether it be law, accountancy, mentoring, marketing.” An XYZ events programme is building a buzz, months ahead of XYZ’s completion, said Reay. The space differs from the average funky co-working hangout in offering greater security, along with more rigid selection criteria in terms of sector.
Spaces like Rise and the Vault may yet foster a disruptor on the scale of an Uber or AirBnB. Although the number of booming fintech operators may be small so far, Loveday reckons the building blocks are being put in place, citing the new connection between Manchester Airport and the west coast of the US as potentially crucial: “San Francisco and Silicon Valley still dominate tech venture capital funding worldwide and offers the North of England access to the most important start up region in the world”.
Cheesewright agreed that things are changing, and that the financial heavyweights are playing a part: “It did initially look like ‘innovation smartwash’ when the banks moved into this space, as if they were being dragged along, just to stop profitable bits of their businesses being shaved off by hungrier, smaller businesses. But things have moved on.” The game has now moved, he said, into a “finessing space” beyond the bread and butter stuff like payment processing into single-purpose projects, such as banking apps using Artificial Intelligence.
For Manchester then, fintech looks more opportunity than threat, notwithstanding the claim by a Goldman Sachs that up to £3.3bn of revenue in financial services is at risk of being displaced by fintech start-ups. With proximity to and engagement with tomorrow’s money-makers the key driver, any threat looks more urgent for the contact centre and low-cost back office than it does for prime offices.