How UK Fintech companies are benefitting from R&D tax credits

What is FinTech?

As a definition, Financial Technology (FinTech), is usually applied to the segment of the financial technology delivering mobile payments, money transfers, loans, fundraising and even asset management. It also relates to the study and re-working of financial regulations, new innovations and customer behaviour, and security.

FinTech has enormous potential for future growth. In fact, between 2014 and 2018, £130 billion has been invested in Financial Technologies. In 2017, British FinTech start-ups alone took £800 million worth of investment, a trend that is steadily growing.

Are R&D available for UK FinTech companies?

FinTech innovation and R&D credits were made for each other. R&D can be applied to fund companies in such activities which may not have been relevant in the past; however, they can be considered for R&D tax credits for up to a third of the costs incurred, which means for every £200,000 you spend on innovative projects, almost £65,000 could be claimed. A figure not to be sniffed at!

The UK financial sector is the main driver of the country’s economy, particularly in London, so the government is investing in making sure that the development and support of technological and financial talent remains a priority. The London Mayor’s Office has confirmed that 40% of the London workforce is made up of the financial and technology services alone.

Financial Technology (FinTech) has significantly benefitted from R&D Tax Credit claims since its inception. FinTech projects are eligible for R&D because they can have very demanding technical requirements, including security. It is rare that these can be fixed by off the shelf software, therefore R&D is vital to enable companies to invest in solutions.

What are the eligibility criteria?

The FinTech sector is mostly virtual, however, it still has the potential to qualify for R&D tax credits. If you are developing new or improved products, services or processes and there is an element of risk in the outcome then you could be eligible for this generous government support. This means that for every £1 you spend on research and development you could claim 33p back in qualifying R&D.

How is the government further helping FinTech businesses?

The government has devised what is known as the Fintech Sector Strategy, which includes action plans designed to ensure that the UK is the best place for FinTech business, and how to maintain that position.

The FinTech Sector Strategy comprises of two elements:

– Meeting the needs of the FinTech sector

This deals with finding ways of supporting entry and growth faced by FinTech firms. It is devised using analysed data from the UK FinTech Census, which is in itself a comprehensive review of the challenges the sector faces. It was commissioned by the government during the first International FinTech Conference in March 2017.

– New opportunities

The strategy also identifies areas of up and coming opportunities, offered by UK FinTech, covering new and emerging technologies, resulting in a positive uplift across all the sectors in the UK, especially the financial scene.

How are R&D Credits helping the UK FinTech market to grow?

Financial services have always been slow to embrace new technologies; however, FinTech has recently become a vital field for investment for any company wishing to remain abreast with its competition, and become leaders in their field.

Smart companies are investing in innovating technology which allows them to operate more efficiently and increase profits, as well as creating a rewarding customer journey.

Areas of R&D funding in the FinTech sector are various and include:

– Payments and transactions
– E-wallets
– Encryption, log-in and authorisation
– Retail & mobile banking
– Trading, lending & crowdfunding
– Tokenisation
– AI

What are the FinTech trends for 2019?

There are massive changes happening in Europe in the banking, finance and insurance industries, which is in part thanks to the European Commission published Action Plan which focuses on the opportunities generated by technology-enabled innovation in financial services.

This Action Plan should see Europe become an international destination for FinTech, with both businesses and investors being able to full advantage of the opportunities offered by the single market in this fast-moving sector.

London has traditionally been the FinTech start-up and financial capital of Europe. However, with Brexit looming, the likes of Berlin, Stockholm, Paris and Amsterdam could be primed to supersede London in this respect. With the development of wealth management, peer-to-peer lending, cheap or free global payments facilities and blockchain, the way we manage our financial affairs is fundamentally changing.

The EU’s Revised Payment Services Directive went into force in January 2018, unlocking a new wave of opportunities for start-ups, leading banks to:

– Share their data with third parties;
– Allow third parties to initiate transactions through the bank.

Why is this important?

Customers can allow a FinTech company to access their banking information in order to produce balances and review transaction history. Not only that, but they can also allow these companies to process payments out of their bank account on their behalf. PayPal has been innovators in these processes by not charging additional fees if they secure payment directly from credit or debit card details saved into the payment account.

Success stories in FinTech innovation and what R&D credits can help you achieve

Let’s take a look at the below example of successful FinTech companies which have been true pioneers in the sector:

Funding Circle

When Funding Circle launched, small businesses found it confusing and difficult to obtain finance for projects. This meant that businesses couldn’t get the cash they needed to grow, and investors could not get the returns that they were seeking. However, now with Funding Circle, a platform is created where they could help each other.

Funding Circle has lent £5 billion to 51,000 small businesses globally and in 2017 the money it raised created and sustained 75,000 jobs.

Roobee

Roobee has younger investors in mind and is focused on providing ordinary investors with the same tools and opportunities as the mega-rich. With Roobee you can invest in a range of different markets, and have instant access to buying investment products from each market, totally commission free. In fact, investors are able to get started from just $10.

They have helped over 5,000 people invest over 21,000 ETH (equivalent to $15 million) in several investment funds, venture and blockchain projects.

Onescan

Onescan is a mobile payment concept predicted to become a massive leader in its field. In fact, at a recent World Mobile Congress which took place in Barcelona, Onescan was voted one the potentially life-changing and impactful innovations of the global mobile industry over the next 10 years.

It’s a well-designed app on your phone which stores your personal details so you can make mobile payments online in seconds. It facilitates a super smooth transaction without the need for usernames, passwords, or card details.

UK based Onescan is a pioneer in its field of log-in and payment applications, gaining two successful UK patents.

Are you a potential FinTech R&D success story?

A FinTech start-up culture is growing at lightning speed, especially in London, where an annual FinTech festival is held, and a number of FinTech hubs and accelerators offer support to companies in the sector.

FinTech has probably touched all our lives in one way or another in recent years, through various FinTech software, mobile banking apps or contactless card payments, which most of us use daily and now take for granted.

R&D Tax Credits can help you be the next big innovator in the sector, the possibilities are endless and the support is just waiting for you, make sure you are a part of it!

R&D Credits benefit FinTech projects that can change lives

Here are three positive ways in which R&D credits can help the FinTech sector influence vulnerable people’s lives:

We take banking for granted but there are millions of people have no access to banking in some of the poor countries. Even in the UK, an estimated 4% of households do not have a bank account. M-Pesa, for example, which based in Kenya, and bKash, headquartered in Bangladesh, are providing people with access to financial services with mobile-based payment systems.

What if you don’t have a legal identity? There are a staggering 2.3 billion people in the world who do not have a legal identity. Without it, it’s almost impossible to access social and financial services. AID:Tech uses FinTech blockchain to create unique and permanent digital identities, something that is vital for people like the Syrian refugees in Lebanon.

R&D Tax Credits are a lifeline for a huge amount of companies, both established or just at the start-up level, which can sometimes be overlooked. Innovation in the sector is the denominator, and once identified, many FinTech projects could be eligible under the scheme.

Deciding to claim for R&D credits can deliver significant financial rewards, which are crucial for businesses at their launch stage. However, you must achieve a deep understanding of the scheme, to ensure accuracy in the application process. This is where F.Initiatives can really help you.

The UK FinTech sector is thriving but with Brexit on the horizon, R&D tax credits will be even more vital for further investment and growth in the sector. British firms with a strong understanding of R&D credits in FinTech development will be able to move fast and achieve the best funding in order to propel them into the future.

Being considered for R&D tax credit funding is easier than most people think. As long as the basic criteria for qualification for the project or investment is met, and the right amount of support is received, the application process can be rather straight forward.

For information and advice on whether your FinTech venture might qualify for R&D tax credits, as well as support on applying for them, get in touch with F.Initiatives at contact@f-initiatives.co.uk