The fintech sector is continuing to revolutionise the financial services industry with the promise of simplifying transactions, reducing costs, empowering customers and enhancing security.

And London continues as a leading global fintech hub; there is a thriving ecosystem of around 2,500 fintech companies in Britain, mostly in the capital – a number projected to grow to more than 3,000 by 2030. The sector contributes an estimated £11bn and more than 76,000 jobs to the UK economy, according to the Department for International Trade and, bearing in mind the importance of London as a financial centre, it’s a sector that will only get bigger.

The combination of a fast-growing industry and openness from consumers, policymakers and incumbents to embrace the digital shift has led to the UK having one of the highest fintech adoption rates in the world – 71%, well above the global average of 64%.

Not surprisingly, there is much enthusiasm to stake a claim to a slice of this lucrative pie. In January this year, Big Four firm EY tied its colours to the fintech mast with the launch of its FinTech Lab in London and plans for another in Edinburgh to open later in the year.

In broad terms, the Lab will provide support to fintech start-ups and scale-ups as they look to create profitable solutions to financial challenges, such as fighting financial crime and financing a sustainable economy – backed with several million pounds of investment over the course of the next 12 months.

The Lab is run by Mark Jannetta, who joined EY in October last year from the innovation team at Barclays. Jannetta will oversee a team of 15 at EY. The objective isn’t to provide business consulting for these ambitious start-ups, he says, “It’s about getting a more intimate understanding of who they are, what they do and what they can do, so we can best support them in their journey.

“We want to get much closer to fintechs on a day-to-day basis, so that means being with them at grassroots and understanding what they care about, what’s important to them, and the big challenges they face in getting to market and gaining traction,” Jannetta adds.

“It's around seeing good ideas, but then being able to build out propositions and solution opportunities at pace and at scale. When it comes to innovation, there’s no shortage of people knocking on the fintech community’s door for good ideas. But a lot of the good ideas just don't go anywhere because they don't have that initial support and momentum and people who can see the application of what they’re proposing.”

The EY FinTech Lab offers dedicated environments and teams of technical resource, including developers and customer experience experts, to help turn ideas into proofs of concept. “We're building a dedicated space where we can work alongside fintech, we can lead and support, we can share ideas and we can get these early ideas moving,” says Jannetta.

As for what’s in it for EY, he says that one of his first questions when he joined was whether the firm had an interest in taking a stake in the businesses it earmarks for success. However, that’s not the initial focus, Jannetta says. “There’s a value proposition on a number of levels. We learn new insights and new ways of working. We meet great companies and, by supporting them in the right way, we form a relationship so when they get bigger and better we are part of that journey.

“In the first instance, it is about engaging and proving our value. And, off the back of that intention is that we start to develop revenue streams further down the line. But initially, it is more about the engagement.”

Given EY’s client base of incumbent financial services players, the company also plans to introduce some of the ideas that emerge from its FinTech Lab to them. “It's about finding good companies and best-in-class solutions for banks and financial institutions to partner with to increase their overall proposition.”

Areas of interest will be demand-led, Jannetta says, with an initial focus on technologies that help to combat financial crime, specifically considering areas such as authorised push payment fraud and disrupting the use of mule accounts. The first tranche of applicants has already been whittled down to eight, with plans to consolidate down to three those whose concepts will be developed into working prototypes.

The next area will be announced in March, with the EY Lab team undertaking regular three-month structured, data-driven assessments of the fintech market to identify the highest value propositions with the best potential for success. 

“The Lab will welcome – and proactively seek out – the involvement and participation of organisations at all stages of their innovation journey, whether it’s a fintech, bank, industry body or wider partner. It can be to discuss a real-world problem an established institution may be facing, a compelling proposition a fintech has devised to help solve it, or to input into which propositions to develop.”

EY is not alone in recognising the opportunity. Alongside rival firms, policymakers are also behind initiatives to help support and grow the UK fintech ecosystem. One such example is the Financial Conduct Authority’s Regulatory Sandbox, launched in 2016 to allow businesses to test their products and services in a controlled environment with real customers alongside regulatory expertise.

Regardless of the route fintechs take, Jannetta says success hinges on the ability to clearly articulate the proposition by defining what a proof of concept could look like and how they would execute it. “They need to be thoughtful about defining the future roadmap and next steps, making sure they have a clearly outlined business case and value proposition. It’s fine to build in assumptions, but fintechs need to make it clear how their idea will benefit the bottom line of their target stakeholder.” 

Jannetta believes the biggest challenge facing fintech firms is the process of working with big financial institutions. “It can still be prolonged and complex,” he warns. “Fintechs need resilience within these processes and should be prepared to work outside of how they might normally to satisfy a bank’s compliance and controls standards.”

Preparation and due diligence is key. “Many banks, for instance, have public web pages that show their control standards and proof-of-concept agreements, Jannetta says. “Fintechs should become familiar with these and prepare as much as possible, to make themselves as attractive a proposition as possible to work with.”