Why is the UK Government Funding FinTechs?

WEEKEND READING: At a time when the UK fintech sector is thriving, why is the government investing millions, and where is it going?

Why is the UK Government Funding FinTechs?
Photo by Ed Robertson on Unsplash

The UK banking industry has been through tumultuous times in the last decade. However, in recent years there has been an explosion in technology firms opening up, and the UK leads in European fintech investment. 

A total of GB£2.9billion (US$3.5billion) was invested into the UK fintechs in the first half of 2019 over a total of 123 deals. The government is set to pump in GB£425million (US$517million) into tech surrounding the banking industry. It is really necessary?

Why is the government even involved?

We all remember back in 2008 when the world of finance went haywire - the United States had institutions collapse, Iceland (the country, not the supermarket) nearly went bankrupt, and in the UK some of the biggest banks nearly fell in on themselves after years of playing with toys they didn’t read the instructions for.

One product of the mess was the government taking control of RBS. It didn’t happen in isolation. Thanks to EU rules on state aid, they demanded the government counter the help with doing something to help the smaller end of the UK banking industry.

Enter stage right, the Banking Competition Remedies Ltd (BCR). It’s an independent body that has been tasked with doling out a pot of nearly £1billion to banks and companies who pledge to improve the financial services landscape in the UK. The scheme comes in two parts…

Incentivised switching scheme

BCR have given £275million to challenger banks to be able to lure business customers away from RBS’s divested business bank, Williams and Glyn. The system is open to businesses with turnovers of less than £25million and there is a pot of funds to cover costs of switching, such as early settlement fees on lending - which can also be switched in the process.

This system is only available to businesses that were with RBS, so it might not be relevant to a lot of newer businesses. It does, however mean that customers are moving over to challenger banks and making their offerings better. Increasing competition in an industry is never a bad thing.

Capability and innovation fund

The CIF has much more wide-reaching scope to disrupt the financial services industry. This can only be a good thing for all of the SMEs in the UK. 

The money has been split into four pools, each with different purposes…

  • Pool A funds were given to banks to enable them to offer better and more advanced current account options

  • Pool B money was awarded to existing banks to allow them to modernise and streamline the systems and products they already have

  • Pool C offered cash to banks and other companies that will increase lending capabilities and payment services

  • Pool D was aimed at smaller companies, giving them funding to develop and commercialise financial technology solutions

Funds have all been awarded and each recipient has made commitments for what they plan to do with the cash injection.

Some of the big industry names on the list include:

  • Starling Bank, who have pledged to increase their client base outside of London, continue to develop their tech offering, and make their systems better

  • Nationwide Building Society; they’re planning on developing their first business bank account

  • Atom Bank are intending to increase the amount of business lending available in the market and make the credit process easier

There are also some smaller companies that have been awarded £5million each to bring about advances. Here, we’ll give you the lowdown on the five UK companies and how they are going to improve the fintech landscape in the UK.


London based Codat have an Application Programming Interface (API) that is going to  make accounting systems simple and streamlined. In days gone by, all of the business solutions used within a UK company would do their own thing and there would be exporting and importing data all over the place.

APIs are changing that. They are a system that should be able to feed data and processes in from lots of sources and give you a seamless outcome to look at. Peter Lord, the CEO and co-founder of Codat explained in an interview, “So many products operate in individual silos, requiring businesses to spend so much manpower and time in manually collecting and sending data in order to fulfil simple business functions.”


The cloud-based company, headquartered in London, have a super fast payments system and API. Their system works in real time and intends to make e-commerce gateways and payments processors much more speedy.

Although their offering is rather niche, by making settlement of payments faster it can only benefit users of online marketplaces. We all want to get money sent, and importantly, received faster, and Form3 offer a no-downtime system and no need for new hardware and software for companies that sign up. 


Co-founder Caroline Plumb drew on her experience in her first startup and saw that data processing and compiling financial reports was a pain. Fluidly harnesses AI and financial intelligence to have better forecasts for cash flow and credit control. 

The system is designed for your accountant or finance team to be able to monitor and predict your company’s financial situation. Of their goal, Plumb has said, “We’re on a mission to deliver cash flow control, certainty, and confidence so they [CEOs] can sleep soundly knowing their financial situation is secure.”

Swoop Funding

UK startup businesses that are looking for funding or borrowing can go to Swoop, aiming to find companies a match with funding. Their platform can help businesses get access to equity and grants, as well as traditional investment and borrowing. 

Swoop is a newcomer to the scene, having only been founded in 2018 by Andrea Reynold and Ciaran Burke. The company received £1.5million in a seed funding round that closed in June 2019 as well as the £5million from BCR. Reynolds describes the company as, “... a virtual chief financial officer, connecting SMEs to the best solutions for their business needs.”

Funding Options

As the name suggests, Funding Options helps SMEs find the right type of credit for their needs by matching their requirements with a database of credit suppliers. They have options for asset finance, business credit cards, commercial mortgages, and more. They work with brokers and other funders and has been selected to partner with the government’s British Business Bank. 

Writing about the cash injection from the CIF Pool D allocation, CEO Conrad Ford said, “at Funding Options we’ve already proven that we can enact genuine market change in SME financial services with £5 million, and we’re ready to show that we can do so much more.”

What’s next?

The UK economy looks very different compared to ten years ago, even five years ago things were hugely different. The use of smartphones, on-demand services like Deliveroo, and things being pushed to go faster such as Faster Payments in banking, all go to show that the country is still dynamic.


Image credits

Lehman Brothers - Flickr

Cash - Unsplash

Deal - Unsplash