Financial Technology (FinTech)
Overview
Fintech, which is short for financial technology, refers to the application of technology in providing, enhancing or revolutionising financial services, ranging from the app that is used to check a balance, through to the infrastructure which transfers money between banks in milliseconds, to the algorithms that construct and regularly readjust a portfolio without any human adviser being involved.
The UK is one of the world's leading fintech centres, with more unicorn fintech companies than any country other than the US and China, driven by talent in London, the FCA's supportive regulatory environment, and substantial venture capital funding.
The sector includes digital banking, payments, robo-advice, open banking, insurtech, and lending products such as buy-now-pay-later; although these address different issues, they all share the same concept: software carrying out tasks banks used to perform manually, but faster and at lower cost.
Digital-only and challenger banks
Challenger banks are built entirely on smartphones, with no branches, and were set up rather than incorporated into existing banking IT systems.
Monzo was founded in 2015 and has since developed a customer base of more than 15 million; it made its first profit in the 2024 financial year with a pre-tax profit of £15.4 million and, in the 2025 financial year, this amount rose by eight times to £113.9 million on revenue of £1.2 billion.
Revolut was established in 2015 and has since offered its services to 70 million customers around the world (approximately 13 million in the UK), its market value having hit $75 billion; for a number of years it had been working with an e-money licence rather than a full UK banking licence and it did not receive full authorisation until March 2026.
Anne Boden founded Starling Bank and, as the first UK-based challenger bank to achieve consecutive profitability over two years, by March 2026 it had accumulated a profit over a five-year period, with a pre-tax profit of £217.1 million on revenue of £887.4 million.
Payments
It is a mistake to treat fintech companies as banks when it comes to holding people's deposits; they mainly provide a way to transfer money between businesses, banks, and consumers.
Stripe was established in 2010 and allows businesses to accept card and online payments as long as a small amount of code is incorporated; it is one of the most valuable companies in the world, is not a publicly owned company and had a value of $159bn by 2026, and in 2025 it handled approximately $1.9 trillion in payments.
Wise, founded in 2011 as TransferWise, offers better exchange rates than banks because it arranges currency transactions directly between individuals rather than through the traditional international banking system; the company is currently listed on the London Stock Exchange and has over 15.6 million active customers.
Robo-advice
Instead of having a human financial adviser carry out the task, robo-advisers create a diversified investment portfolio by using algorithms that are based on the customer's risk level.
Nutmeg, which made its appearance on the market in 2012, was one of the first robo-advisers to be available in the UK and was bought out by JP Morgan in 2021 before being incorporated into 'JP Morgan Personal Investing' in 2024.
Moneybox was introduced in 2016 and at first provided a savings service by rounding up the amount of each payment made with a card; it has since broadened its range of products to include ISAs and pensions; and by the end of 2025 it had about 1.7 million customers and £19 billion in assets under management.
Buy-now-pay-later
People can choose to purchase items without having to pay interest, and their requests for this are dealt with at the checkout counter.
Since 2017, the BNPL sector in the UK has grown, the amount increasing from around £60 million to over £13 billion by 2024. BNPL was not previously included in consumer credit law and therefore consumers did not have the normal protections, but on 15 July 2026 the FCA included BNPL (which is now known as "Deferred Payment Credit") in the regulated consumer credit system.
Open banking
People may not be aware of open banking but they still use it every day. Because of PSD2, the main providers of current accounts in the UK have had to set up secure APIs so that customers can allow regulated third-party applications access to their transaction data or make payments themselves, all under their clear consent, rather than the previous insecure method in which applications used to request users' log-in details in order to get access to their online banking.
The new system now enables features such as checking the balances at a number of different banks, improving mortgage affordability assessments, and providing an instant 'pay by bank' checkout. Adoption in the UK is the highest in the world: in one month in 2025, there were 13.3 million active users.
How fintechs make money
The features referred to in the subscription agreements are also available in the paid plans, for example where additional features such as travel insurance or a higher cashback are offered (as in the case of the Monzo Plus and Starling add-ons).
Interchange and FX fees are either a small percentage of the total transaction amount or a markup on the currency conversion (Wise, Revolut).
When Stripe is processing payments, it imposes both a percentage fee and a fixed amount. Management fees are a fixed percentage of assets under management each year (Nutmeg, Moneybox). Data and analytics: Income obtained from anonymised data on spending or from credit scoring based on open banking.
Regulation
The United Kingdom wants to encourage innovation in the fintech industry while also ensuring consumers' money is protected. The FCA's regulatory sandbox, launched in 2016, enables firms to test new products with real customers under a reduced regulatory burden before applying for full authorisation.
Note that there is a difference between an e-money institution (EMI) licence and a full banking licence; although an EMI can issue e-money and provide payment services, it cannot lend money or offer overdrafts, and its customers do not receive the benefit of FSCS protection.
A bank that is fully regulated by both the FCA and the PRA can accept deposits and lend against them under more strict capital requirements, even though deposit protection still remains at £85,000.
Although Monzo and Starling started as full banks, Revolut did not receive its full UK banking authorisation until March 2026, after operating as an EMI for many years.
Risks and criticisms
When carrying out account takeover and authorised push payment scams, fraudsters usually target banks that operate only via a mobile app.
There is considerable pressure to make a profit because, in earlier years, many competing companies secured investor funding even though they were not profitable; as a result, many smaller neobanks around the world have gone bankrupt while trying to do so.
Some fintech companies have chosen to operate as EMIs rather than banks to avoid more rigorous regulations, even though the products they offer are similar to those provided by banks.
For a long time there has been concern about consumer debt because the easy approval process of BNPLs has been criticized for causing people to spend too much, particularly among younger users, since it is actually the younger users who will be mainly responsible for the regulation which is set to begin in July 2026.