Innovation Hub: market insights

Our data reveals the type of firms and technology supported by the Regulatory Sandbox and Innovation Pathways, including firm sizes, sectors and locations.

Innovation Hub has been helping firms to develop innovative products and services since launching in 2014. During this period, due to the number of firms we have supported and engaged with, we have gathered a considerable quantity of data and insights into the growing fintech market in the UK. This page is the first step in sharing these insights with the broader market, and is intended to grow over time as we collect more data.

‘Fintech is not a niche within financial services. Nor is it a sub-sector. It is a permanent, technological revolution, that is changing the way we do finance.’ The Kalifa Review of UK FinTech

Key facts

  • Supporting firms since 2014
  • Over 2,000 applications for support
  • Over 800 firms have been supported
  • Over 150 firms have been accepted for testing in the Regulatory Sandbox 

1. Sector

We support firms across all sectors, from firms that themselves provide financial services, to firms that help other firms to provide regulated activities. We want to hear from innovative businesses across all sectors, whether they fit into existing categories or whether they are doing something the market has not seen before.

 

Chart tips: hover over data series to view the data values and filter the data categories by clicking on the legend.

 

Graph 1 shows the proportion of firms we have supported through Innovation Pathways by sector. From 2014 to 2021, most firms operated in the retail investments, retail banking and payments, and retail lending sectors. The retail investments sector represented between 20 to 43% of firms each year.

In 2020, during the coronavirus (Covid-19) pandemic, we saw a rise in the proportion of firms in the retail banking and payments sector, as consumers and firms sought innovative ways of making and receiving payments when restrictions on people’s movements were in place. The ‘cross-sectors and others’ category refers to products or services that aren't specific to one sector, such as firms providing software or RegTech solutions to financial services providers.

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Graph 2 shows the breakdown of firms supported in the Regulatory Sandbox across all 7 cohorts since 2016. Across all cohorts, most Regulatory Sandbox firms operated in the retail banking and payments sector, excluding cohort 4 where 31% of firms were in the wholesale financial markets sector. Over all cohorts, cohort 2 had the largest proportion of firms in the general insurance and protection sector, with 29% representation. Since cohort 4, the proportion of retail lending firms has steadily risen from 12% to 25% in cohort 7.

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2. Technology

Graph 3 shows that most business models that were accepted into the Regulatory Sandbox since 2016 were focussed on distributed ledger technology (DLT), blockchain and crypto assets. Sandbox firms pioneered the use of this technology for diverse purposes such as money remittance and share issuance.

Around 15% of firms accepted into the Sandbox had non-technology driven innovative business models and 14% of firms used Open Banking. The latter was used to help consumers track the sustainability of their spending habits, or to help firms make better lending decisions. We’ve also supported a number of firms using RegTech and artificial intelligence/machine learning to test within the Sandbox.

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The technology firms use to develop new and innovative business models is constantly evolving. Graph 3 shows a snapshot of technologies that have been used within the Regulatory Sandbox so far.

We encourage firms to apply to the Regulatory Sandbox that have:

  • developed new technology that may not fit into any of the categories above
  • applied existing technology but in a new way

Firm size

We can support firms of all sizes, at any stage of development, provided they meet our eligibility criteria. These could include:

  • Start-ups, scale-ups, incumbents
  • Small, medium and large firms
  • Regulated or unregulated

Most of the firms we support are unregulated at the point of applying. 84% of firms that apply are start-ups that aren’t currently carrying out any business activities. Many of the firms we support will go on to become authorised, but we’re happy to support firms that don’t intend to carry out regulated activities. Instead, these firms may be supporting regulated financial services activities (for example, RegTech or SupTech firms).

3. Location

London is a globally recognised hub for FinTech, but innovative businesses in the UK aren’t restricted to London. While our remit is UK financial services, we are happy to receive applications from firms based overseas who want to expand into the UK.

Graph 4 shows the regional split of firms that have been accepted into Innovation Pathways since 2019. Most of the firms supported were based in the UK, with 54% based in London and 37% across the rest of the UK. Innovation Pathways has supported firms around the world across Europe, North America and South America.

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Graph 5 shows that the same trend is true for the Regulatory Sandbox. Over 60% of Regulatory Sandbox firms are based in London and a quarter of firms are based around the rest of the UK. More than one in ten firms we have supported inside the sandbox from 2016 to Jan 2022 were coming to the UK from another country. 

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Copyright

The data on this page is available under the terms of the Open Government Licence.