By 2020 half of all payment service providers will be digital only, following a 51% growth spurt of e-money firms between 2017 – 2018.

The findings come from a new report – The UK Fintech Revolution – from leading financial services and IT recruiter Robert Walters and market analysis experts Vacancy Soft.

Ollie Sexton, Principal at Robert Walters said: “Technology has transformed the way we do pretty much everything – from shopping to socialising - and the emergence of fintech start-ups and their clever use of technology has made it easier for people to invest, make payments and even get a loan.

“For millennials who grew up with mobile devices this is particularly appealing because they want to conduct financial transactions the same way they would share pictures or apply for a job.

“The pace of change has been so rapid over the past five years that the perception of digital banking has shifted from an ‘option’ to a ‘requirement.”

Traditional Banks Falling Behind

Daniel Connors, Director of Financial Services said: “The 2008 global financial crisis resulted in employment within the banking industry declining by 7% (100,000 people).

“This led to a period of stifled innovation, with banks understandably focussing on their balance sheets and profitability.

“This contraction in the market created the vacuum to enable the people with the expertise to develop the fintech business models that had yet to be created within the banks themselves.

“Arguably it is only now, with the rise of the fintech start-ups, that the banking sector has woken up and started to adapt to the new paradigm.

“As a result, IT is now constituting over 30% of professional roles in the sector, up from 24% in 2017, with this projected to increase further.”

In 2018 fintech was the fastest growing sector in the UK – with job creation increasing by 61% in London and by 18% in regions outside of London, almost 80% across the UK.

This compares with just 17% job creation for the banking and financial services sector across the whole of the UK between 2017 – 18.

Of the 29 fintech unicorns* worldwide (*companies worth more than $1 billion), nine are in San Francisco, while seven are housed in the UK.

In fact, the UK’s fintech ‘unicorns’ had a combined revenue growth of 130% in the last 12 months – in monetary terms this was an increase from £77.1m to £177.6m revenue.

Blurring Lines

Tom Chambers, Manager of Advanced Analytics and Engineering at Robert Walters said: “The rise of smartphones and 4G has significantly reduced barriers to entry for new players. The ‘fintech unicorns’ are spearheading innovation through successfully digitising payments, peer-to-peer (P2P) finance and fund transfer processes.

“As a result, incumbents in the banking sector find they are having to adapt to this wave of innovation to compete with the likes of Funding Circle, Transferwise and Revolut.

“With this in mind, banks are now utilising the latest technologies to streamline, resulting in a new wave of change, from closing branches (3000 have closed down since 2015) to mobile-based payments.

“This means is that now the line between fintech and traditional banking is becoming increasingly blurred, especially given the fact a fintech company is now able to get an EU banking license - allowing them to guarantee customer deposits.”

“Currently, fintech is still in the explosive phase. However, as well as embracing technology, it’s possible that established banks could scope the fintech market for acquisition opportunities and increase segmentation of their core services to gain back competitive advantage.”

Download the full report here.