Risk, resilience and recovery: an ecosystem approach to facilitating growth

Date: 25 March 2021
Author: Blair Pusey, Head of Sales and Partnerships, Nimbla

Risk: Market developments in response to systemic risk

The past year has been an education in catastrophic risk. Has this disturbance been bad news for the original market disruptors (fintech companies)? Largely, no. Valued at circa £7 billion, the UK’s fintech sector is more acutely in demand as markets seek solutions that can facilitate recovery. But as the recent Khalifa recommendations indicate, UK fintechs must move on these opportunities now or risk obsolescence.

In a recent whitepaper, Co-founder of AI-powered credit analysis firm WiserFunding and NYU Stern School of Business professor, Ed Altman pointed out that most governments have tried to cure the debt problem with more debt. This has left us overleveraged (£202 trillion, according to the Institute of International Finance), with ‘zombie’ economies struggling to return from their hibernation to grapple with unprecedented debt. Fintech is uniquely placed to supply the solutions that this stressed market requires to resume its activities.

In 2018, corporate engagement with fintech accounted for a third of venture capital investment. Rishi Sunak’s new budget supports investment in fintech on a much grander scale. Fintech has a role to play in this new landscape and doing so successfully will involve making full use of Sunak’s budgetary emphasis on high growth businesses. With unemployment and insolvencies dramatically lower than during other crises due to furlough schemes and moratoria though, we have yet to see how the market will respond when the lockdown is lifted and 2021 progresses.

Resilience: Ecosystem challenges to implementing fintech solutions

Ron Khalifa has stated that his recent eponymous review of UK fintech “aims at creating an ecosystem that is sustainable, inclusive and world-leading”. In order to do so and sustain the UK’s position as a globe-leading financial services hub, the report recommends, institutional capital will be shaken out of coffers to create a £1 billion “Fintech Growth Fund”. Commissioned prior to the pandemic but opportunely timed, the Review also recommends improving the listing environment by relaxing pre-emption rights, reducing free float and instating dual class shares. Store is also set by the idea that fintech must span geopolitical barriers and borders in the race for data.

In the post-pandemic environment, organisations that expand their business models and enter new markets will stake their claim to more data, generating new product and monetisation possibilities and more sustainable growth. To gain the critical mass on data, collaborating with incumbent financial institutions is important, but can be fraught with implementation difficulties. Major banks are often slower moving and more bureaucratic than fintechs, and the behavioural change that accompanies new products requires investment in education.

Sandboxes are the BAU solution to integration challenges, and Khalifa proposes to broaden their reach by instituting a “scalebox” to support scaling of new fintech solutions. From a growth perspective, banks will continue looking beyond the current market for solutions to issues such as the funding gap, productivity, skyrocketing risk and uncertainty and of course the unprecedented debt burden. With the global pandemic sharpening the market’s appetite for resilience-boosting measures, it is little surprise that insurtech investment was on the rise in 2020. Insurance has been notoriously slow to digitise, offering low-hanging fruit to insurtech. Now that we have a amassed record levels of unsustainable debt, the question is: can fintech offer more sustainable solutions?

Recovery: Opportunities for UK Fintech in 2021

As the UK wrestles to maintain its position as a world leader in financial services, the UK will require financial mechanisms that address system-level challenges. Incumbent players hold the keys to customer and regulatory relationships, financial data and technical infrastructure, but the major blocker to scaling tech is data quality. The big data solutions that excite most fintech founders rely on fungibility and cleanliness, on which front big tech’s capabilities for data collection and analysis are formidable. But the economic crisis prompted by the pandemic (and to a lesser extent by Brexit) paves the way for innovation which fintech businesses are perhaps better placed to supply. Khalifa advocates for the development of a “global family” of fintechs through an “international action plan”, and for fintech to become an “integral part of trade policy”.

In terms of new market opportunities, 45% of SMEs took on loans according to the British Business Bank’s latest figures. This makes them drastically overleveraged and in need of fast, accessible financial solutions. Alternative lending will be crucial as loan schemes end and businesses seek more sustainable sources of finance. But lenders need to consolidate their accounts before they help other businesses. As a receivables risk transfer (risktech) business, this is what I believe Nimbla offers. Clearly, fintech collaboration will be crucial in stabilising the SME market, and in helping small firms to grow in the coming years.

With manufacturing recovering more quickly than services, there are as ever massive opportunities in both AI automation and IOT. Big data analytics will also remain a disruptive force, making effective engagement with policymakers and other private market players crucial for fintech. Decentralisation will also be a theme of the post-pandemic environment, and attracting the best global talent as ever a priority for fintech firms. Finally, many of the Khalifa recommendations focus on collaboration, reaffirming that Fintech Circle is potentially a powerful resource. To echo the sentiments of the head of Innovate Finance Charlotte Crosswell, UK fintech is positioned to lead the charge in the growth of the sector post-pandemic, but we must act decisively.

We are  interested in partnering with organisations capable of doing that.


Blair Pusey is the Head of Sales and Partnerships at Nimbla invoice insurance. He specialises in supporting technology and high growth businesses, and previously led Strategic Partnerships for MarketFinance, as well as on business development for one of the world’s largest professional services firms.


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