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UK FinTechs Potentially Undervalued After Missing Significance Of Commercialising IP

Date 28/01/2021

  • Fintech valuations missing the worth of intellectual property
  • Findings ease concerns of a ‘tech bubble’ forming in the market

Independent research from GovGrant, the R&D and IP specialists, eases concern around the growth of a ‘tech bubble’ – where stock valuations are unsustainably inflated – forming in the market. The evidence suggests that despite current potential overvaluations of both public and privately owned UK fintechs, there is an opportunity for them to justify and increase value through their intellectual property (IP).

The study of over 500 decision-makers across seven different sectors reveals that whilst 84% of fintech leaders think it is important to secure patents for protection purposes, less than one third (31%) see it as a priority to commercialise their IP.

For many businesses, and especially those in the financial services sector, including fintechs, IP is central to the successful development of their propositions and as such represents a considerable contribution to valuations – though the study suggests this is not currently accounted for in the case of many large fintechs.

In comparison, of the companies operating in the manufacturing sector, nearly half (48%) recognised the importance of commercialising their IP, suggesting the problem is particularly prominent amongst fintechs.

The disparity in the two figures shows that, despite seeing the necessity of a patent for protection purposes, fintechs are not taking full advantage of the commercial value it can add to the business. Not only does a patent help a firm maintain its competitive advantage and attract further investment, it also allows firms to take advantage of HM Revenue and Customs’ (HMRC) Patent Box scheme that allows for a cut in corporation tax for innovation activity within the UK.

Statistics released by HMRC on the use of Patent Box supports GovGrant’s findings. Whilst the Financial and Insurance sector claimed the largest proportion of relief in 2018-19 so far (34%), the statistics show that this was claimed by only claimed by 10 companies. The distinct lack of firms claiming in this sector is proof that fintechs are not taking advantage of the scheme. Indeed, over 60 patents were filed by fintechs in 2019, meaning over 50 companies were not claiming through the Patent Box scheme despite being eligible.

Luke Hamm, CEO of GovGrant, comments:

“By stopping short of using their patents to commercialise their work, fintechs are supressing the commercial value of their IP. Not only does using IP to create value allow them to tap into Patent Box tax, commitment to making the most of IP furthers investment in the UK as a whole and causes further innovation in a positive feedback loop - developments can spark other ideas for the progression of fintech. The opportunity for the UK is huge, and whilst there may be a tech bubble now, increasing focus on commercialisation of IP will enable fintechs to eventually match their valuations, preventing the bubble from bursting. 

“Doing so means making more use of the Patent Box scheme.. To maintain its investment the government needs to see ROI, so if we don’t start using it, we’re at risk of losing it altogether. With so much economic uncertainty at the moment, fintechs can’t afford to miss out on this opportunity.

“We urgently need to encourage them to follow the whole process through – obtaining the patent is a means to an end, and needs to be seen as a value creator, rather protection alone.”