This was the year that the UK’s 20 billion dollar FinTech baby broke through. People no longer say FinWhat? Thanks to Government and significant investor support it is now officially the UK’s hottest technology sector. And this year it hit some major milestones.

Thanks to this agile, entrepreneurial sector, small to medium businesses now have access to finance that, post 2008, proved elusive if not impossible to secure. It’s easier to transfer money without the punishing fees that make the remittance industry worth an estimated £300bn worldwide. One highly visible challenger to banks claims to have saved their customers over £45m in bank transfer fees. And the business in question is still only three years old.

Even high-net-worth individuals – whose trust we might not imagine to be easily won - expect to manage 65% of their wealth relationships digitally within 5 years, according to a recent report.


Fintech stakes its claim in 2014


Silicon Valley Bank’s Jon Barrett calls 2014 a year of maturity milestones for many in Fintech, especially in lending & payments. “The ‘loan outs’ and ‘payments processed’ have left the youthful language of ‘Millions’, entering ‘Billions’ and the surging growth continues,” he said. “This scale has given innovators a stronger voice within the industry, allowing them to form a direct dialogue with Regulators & Governments with an aim to drive fundamental industry change.“

So far, so revolutionary. However, if there is a sense that the capital, at least, is paved with FinTech gold, the realities of building a successful business in the sector are somewhat more sobering.

FinTechs typically have longer product development cycles: you rarely get second chances with people’s money. If you engage with banks, expect a long sales cycle: a very long one. If you engage direct with consumers, you not only have to find them, you also have to win their trust. There is also a complex regulatory environment to navigate; not to mention the major investment required to deliver a billion dollar business of scale.


Starting a business in fintech


Alex MacPherson, Head of Ventures at Octopus Investments, says that businesses need to be supported through various rounds of funding during their life cycle. “Over the last 12 months we have seen the increased rise of peer-to-peer platforms. As with any marketplace removing the intermediaries and enabling investors (whether lending money or investing into equity) results in better returns for both parties. It is noticeable over the last 12 months how these platforms have attracted both individual investors and also institutional investors helping to democratise asset classes that previously were the preserve of institutional investors.

“The entrepreneurial eco system in London and the UK is vibrant with a strength in the creation and development of FinTech businesses as a result of London’s leading position in financial services. This needs to be supported by funding through a company’s life cycle of various rounds of funding. And it needs to include an engaged and enthusiastic IPO market that understands high-growth companies providing a pull from public company investors to assist in the building of billion dollar businesses."


The future of fintech


So how might the revolution look in 2015? Will the focus switch from celebrating the sheer volume of start-ups to building businesses of scale? Will there be more collaboration, as banks and BIG FS and BIG Tech continue to invest in, and partner with, new technologies, models and platforms? Will we see a further FinTech IPO?

What about five years from now? Who will be the businesses transforming the future of finance: long term? Will today’s innovators be the businesses talked about then?

FinTech will continue to win hearts, minds and a growing share of strategic and consumer budgets. Who wins the FinTech revolution, on the other hand, is more likely to fall to the ultimate determiner of commercial success: the customer.

In this field crystal balls are rare, but one key constituent may hold at least part of the answer.

Despite eight of 2014’s top ten investments being made in payments and lending, VC investment in the space actually fell this year, perhaps reflecting the challenge these businesses face in competing both for a customer base and the longer-term investment needed to acquire and sustain it. The customer inevitably, will decide.

And there is no shortage of value-driven services for them to choose from. It’s just that in the current fragmented FinTech market they may not be able to find them all in one convenient site. Might this in itself lead to a shift in innovation … from the platform to the channel? Even to the infrastructure itself? Will we see more collaboration between the innovators with the idea and those with the customer base, and reach, to deliver a cohesive service all in one convenient place? You decide. You really do.

They may not be billion-dollar businesses yet, and their numbers may be modest compared to BIG FS, but perhaps that isn’t the point. FinTech innovation is fast, smart and has the potential to transform financial services. Fact. Whether their creators decide to go it alone or whether they sell in to, or collaborate with, existing providers, FinTech will continue to win hearts, minds and a growing share of strategic and consumer budgets. Who wins the FinTech revolution, on the other hand, is more likely to fall to the ultimate determiner of commercial success: the customer.